Caixin
Oct 12, 2019 03:08 AM
FINANCE

China to Lift Limits on Foreign Control of Financial Firms Starting Jan. 1

China Securities Regulatory Commission provides specific timetable to remove foreign ownership limits for domestic finance companies. Photo: VCG
China Securities Regulatory Commission provides specific timetable to remove foreign ownership limits for domestic finance companies. Photo: VCG

China’s securities regulator pushed ahead with its promise to remove foreign ownership limits for domestic finance companies next year, a positive gesture from Beijing as a new round of trade negotiations with the U.S. takes place in Washington.

Foreign companies would be allowed to take total control of mainland-based futures companies, mutual funds and securities businesses starting as early as Jan. 1, 2020, China Securities Regulatory Commission (CSRC) spokeswoman Gao Li said Friday at a routine press conference.

In a basket of measures announced in July to further open its financial system to the world, the State Council, China’s cabinet, promised to move up the lifting of foreign ownership limits to 2020 from the previously announced target of 2021.

The announcement of a specific timetable on the issue came the same day President Donald Trump was set to meet with Chinese Vice Premier Liu He at the White House after two days of trade talks. The news and an optimistic tone to the trade talks boosted stock markets in both countries.

The Shanghai Composite Index rose by less than 1%, while the Dow Jones Industrial Average surged more than 460 points in the morning session.

Foreign enterprises would be allowed to own full control of Chinese futures companies starting Jan. 1, 2020; mutual funds starting April 1, 2020; and securities companies starting Dec. 1, 2020, CSRC spokeswoman Gao said.

Even though the limits will be officially removed, Chinese shareholders in financial joint ventures may not easily give up controlling stakes unless there’s a special interest arrangement, an analyst at a brokerage in Beijing told Caixin.

Foreign investors first have to gain 51% ownership, and the next step would be to acquire stakes from smaller shareholders and eventually gain 100% ownership. Each step of this process is expected to encounter various problems and obstacles from regulators, other shareholders and the companies, and regulatory approval will take time too, the analyst said.

In March, Japanese investment bank Nomura Holdings Inc. and JPMorgan became the first two foreign companies to win Chinese regulatory approval to set up majority-owned brokerage joint ventures. But from their application in the spring of 2018, it took nearly a year for them to gain final approval.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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