China Drafts Measures To Ease Foreign-Bank Entry

China’s banking regulator has issued a draft measure to amend licensing and oversight of the banking activities of foreign-backed financial companies, according to Thursday (Dec. 28) reports from Reuters. The move is intended to lure investments to China’s financial sector, an economic element that is currently in fast-growth mode.

In a statement by the China Banking Regulatory Commission (CBRC), the regulator said it is gearing up to release measures to “standardize market access” for foreign lenders. The order would reduce the red tape involved in banking services, creating a fair arena for bank branch openings, debt fundraising and the examination of senior executives.

The drafted measures would also “provide a clear legal basis” for foreign-backed banks to make equity investments in local Chinese financial companies.

China recently pledged to make its financial sector more welcome to outside investors and to level the playing field between local financial firms and those backed by foreign companies. Statements made by vice finance minister Zhu Guangyao in November said the government would increase foreign ownership limits on some of China’s joint ventures pertaining to futures, securities and fund markets. The Chinese government is increasing the stake to 51 percent from 49 percent.

Similarly, CBRC chairman Guo Shuqing said in October that China was preparing to open up the banking industry to more investments from foreign players.

In a previous report, Reuters noted that while the cap on foreign ownership would be lifted, it may not prompt a surge in investments. In fact, “a combination of well-entrenched local companies and an opaque regulatory regime” means there will be cautious movement to take advantage of the increased access. In one sense, though, there would be a rebuilding, as the big players in Western banking have had to sell their stakes in Chinese financial firms in the aftermath of the 2008 financial crisis.