China eases operating possibilities of foreign firms in the financial sector

Besides boosting foreign investor quotas on Chinese stock markets, foreign securities firms this week gained the right to raise their ownership stakes in local Chinese securities firms from 49 % to 51 %. The 20 % ceiling on ownership by one foreign entity was abolished. The regulation of foreign holdings is supposed to be phased out completely over the next three years. The measures, announced by PBoC governor Yi Gang at the Boao economic forum last month, are part of efforts to accelerate opening up China's financial markets to international investors. Additional deregulatory measures of foreign companies operating in the financial sector are expected in coming months.

Based on the experience of previous years, foreign securities firms are wary of the proposed reforms. In April, the Financial Times, citing the Asian Securities Industry & Financial Markets Association (Asifma), noted that a draft bill presented in March on foreign securities firms seeking majority stakes imposed unreasonable burdens and favoured Chinese firms. Officials, at will, can in practice continue to thwart the expansion of Western businesses in China.