China Allows Foreign Control of Domestic Securities Firms

China's securities regulator launched new rules on Saturday allowing foreigners to own majority stakes in domestic securities firms, as the country aims to further open its financial sector.

The revised rules (link in Chinese), which took effect immediately, raised the ceiling on foreign ownership of a Chinese securities firm from the previous 49% to a new 51%, according to the China Securities Regulatory Commission (CSRC).

Foreign investors have eagerly expected the move for a long time. China set the earlier cap to protect its then still-young financial markets. But Beijing leaders have decided the time is now right to loosen the restriction to create a more level playing field after years of industry development, industry insiders told Caixin.

The new rules also remove a 20% cap on any single foreign investor's shareholding in a listed securities firm.

China requires foreign investors who intend to gain control of local securities firms to be financial institutions with a sound international reputation and good business and credit records.

Under the new rules, qualified foreign investors can submit applications to the CSRC seeking approval to take control of domestic securities firms or set up new ones, said an unnamed spokesperson with the CSRC.

The new rules also allow foreign-backed securities firms to engage in a wider range of businesses.

China has promised to allow foreign investors to own up to 51% of any joint venture in the securities, fund and futures industries, and remove the cap completely three years after the new rules come into effect, according to a consensus that China and the U.S. reached during American President Donald Trump's visit to Beijing in November.

Contact reporter Lin Jinbing (jinbinglin@caixin.com)