WASHINGTON / HONG KONG (Reuters) – The long-awaited trade agreement between the United States and China promoted new victories for US companies seeking access to China’s 40 billion dollar financial sector, but many of the changes were already underway with Beijing accelerating the opening pace in the last year.
Under the agreement, China agreed to accelerate an earlier period of December 2020 to remove foreign ownership limits in securities companies by nine months, including investment banking, subscription and brokerage operations.
The agreement, which was signed by the president of the United States, Donald Trump, at a ceremony held Wednesday at the White House, promises better access to China’s financial services for banking, insurance, asset management, payments and fund management.
Its objective is to address a number of long-standing complaints from the United States regarding investment barriers to China’s financial sector, including restrictions on foreign capital ownership, discriminatory regulatory requirements and opaque licensing processes.
“China is very eager to get more private funds to invest in the economy” to help boost economic growth, said Andrew Collier, managing director of Hong Kong-based Orient Capital Research.
However, foreign financial companies will have difficulty cornering a majority of the market for dominant Chinese private and state rivals in the near future, he said.
The text of the agreement says that no later than April 1, China will eliminate foreign capital limits and allow US investment banks to participate in local securities businesses.
The limit of ownership of foreign investment banks in Chinese joint ventures rose to 51% in 2018 from 49%. The lack of control and the limited contribution to income have long been a source of frustration for global investment banks.
While Goldman Sachs (GS.N) and Morgan Stanley (MS.N) expect regulatory approval to increase their shares to 51% in their Chinese securities companies, Citigroup (C.N) plans to establish an absolute property securities business after agreeing last year to sell its stake in its previous joint venture.
JPMorgan (JPM.N) obtained final approval from regulators on December 18 to establish a majority-owned securities company.
China, which has pledged for years to open its financial services sector to greater foreign competition, said earlier that the agreement would boost US financial services imports.
But for China’s observers, a key promise made in the thin financial services section of the agreement to eliminate foreign capital limits on companies operating in China’s fund, future and insurance management sectors will be familiar.
“China has already been opening its markets,” said a Beijing-based lawyer, who works with Chinese regulators.
“The real test will be how fast applications and regulatory processes are handled.”
Last July, Chinese Prime Minister Li Keqiang announced that China would accelerate its plans to allow 100% foreign ownership in a series of financial sectors in a full year.
This month, foreign ownership limits on futures companies were eliminated, while China said last year that it would do the same for mutual funds in April 2020. This month, a 51% limit on ownership of assets was also eliminated. life insurance companies.
Similarly, China’s promise on Wednesday to open its payment system to US companies comes after its central bank said it had accepted a request from American Express Co (AXP.N) unit to start operations on land.
Ken Bentsen, CEO of the Securities and Financial Markets Industry Association, which criticized China in the past for failing to honor previous promises to level the playing field, made a cautious note about Wednesday’s agreement.
“We will examine this agreement closely, including what it means specifically to our members in terms of its implementation and compliance,” he said in a statement.
Report by Michelle Price in Washington and Sumeet Chatterjee in Hong Kong; Additional reports by Alun John in Hong Kong; Edition of Leslie Adler, Lisa Shumaker and Himani Sarkar