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China agrees to regulatory easing for foreign investors as part of SED UPDATE
Wed, 18th Jun 2008 22:52
(updates with more SED results)
WASHINGTON (Thomson Financial) - China agreed to ease rules for insurance companies and foreign investors in China's securities market as part of this week's meeting of the US-China Strategic Economic Dialogue (SED).
For investors, China agreed to reduce the period of time that so-called qualified foreign institutional investors (QFIIs) must hold sizeable capital deposits in Chinese banks.
Currently, these QFIIs must hold registered capital in Chinese banks from anywhere from 1 to 3 years. Financial services representatives welcomed this decision today, arguing that it will give foreign investors more flexibility in China's market.
A statement released at the end of the SED meeting did not clarify how much this so-called 'lockup period' would be reduced, and one financial services representative said this suggests the US and China have not yet reached agreement on this specific point.
China has a specific program in place for QFIIs that sets out a range of criteria that large institutional investors must meet before they can invest in Chinese securities. At last December's SED, China agreed to expand the amount of QFII investment from 10 bln usd to 30 bln usd.
For insurance companies, China agreed to consult with the US government on the question of whether to restrict American insurance companies from investing in more than one Chinese company. China in recent years has preferred to limit investments to a single Chinese company.
China also agreed to loosen current restrictions on investments that foreign insurance companies can make. The US sees this as important because insurance companies make money by investing the premiums they receive, and could be more profitable if they had more investment options.
Elsewhere, China agreed to allow qualified foreign companies to list on its stock exchanges, make it easier for foreign incorporated banks to issue yuan-denominated bonds, and allow joint venture credit rating agencies to seek a license to rate corporate bonds in China.
And on a pilot project basis, China agreed to allow foreign financial institutions that do not take deposits to provide consumer finance.
Aside from these changes, China agreed to deliver a study by the end of the year on foreign participation in China's securities market, which could result in recommendations to expand this participation. China agreed last December to begin the study, but did not clarify when the study would be completed.
And as agreed to at the May 2007 SED meeting, China said it has resumed its licensing of securities joint ventures by approving the application of Credit Suisse's investment
banking operations in China.
Engage China, a coalition of nine financial services trade association, welcomed China's new commitments and said they show that the SED is getting results for US companies.
'While modest, the results demonstrate the value of the Strategic Economic Dialogue and underscore the need to continue such high level engagement in the future,' the group said in a statement. 'Financial services is a catalyst for growth across all sectors and must continue to be a central focus of the conversation.'
US financial services companies and the US government have said China needs to open its financial services market to further competition, which will help drive the development of China's domestic economy.
pete.kasperowicz@thomsonreuters.com
pik/tlm/wash
COPYRIGHT
Copyright Thomson Financial News Limited 2007. All rights reserved.
The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
WASHINGTON (Thomson Financial) - China agreed to ease rules for insurance companies and foreign investors in China's securities market as part of this week's meeting of the US-China Strategic Economic Dialogue (SED).
For investors, China agreed to reduce the period of time that so-called qualified foreign institutional investors (QFIIs) must hold sizeable capital deposits in Chinese banks.
Currently, these QFIIs must hold registered capital in Chinese banks from anywhere from 1 to 3 years. Financial services representatives welcomed this decision today, arguing that it will give foreign investors more flexibility in China's market.
A statement released at the end of the SED meeting did not clarify how much this so-called 'lockup period' would be reduced, and one financial services representative said this suggests the US and China have not yet reached agreement on this specific point.
China has a specific program in place for QFIIs that sets out a range of criteria that large institutional investors must meet before they can invest in Chinese securities. At last December's SED, China agreed to expand the amount of QFII investment from 10 bln usd to 30 bln usd.
For insurance companies, China agreed to consult with the US government on the question of whether to restrict American insurance companies from investing in more than one Chinese company. China in recent years has preferred to limit investments to a single Chinese company.
China also agreed to loosen current restrictions on investments that foreign insurance companies can make. The US sees this as important because insurance companies make money by investing the premiums they receive, and could be more profitable if they had more investment options.
Elsewhere, China agreed to allow qualified foreign companies to list on its stock exchanges, make it easier for foreign incorporated banks to issue yuan-denominated bonds, and allow joint venture credit rating agencies to seek a license to rate corporate bonds in China.
And on a pilot project basis, China agreed to allow foreign financial institutions that do not take deposits to provide consumer finance.
Aside from these changes, China agreed to deliver a study by the end of the year on foreign participation in China's securities market, which could result in recommendations to expand this participation. China agreed last December to begin the study, but did not clarify when the study would be completed.
And as agreed to at the May 2007 SED meeting, China said it has resumed its licensing of securities joint ventures by approving the application of Credit Suisse's investment
Engage China, a coalition of nine financial services trade association, welcomed China's new commitments and said they show that the SED is getting results for US companies.
'While modest, the results demonstrate the value of the Strategic Economic Dialogue and underscore the need to continue such high level engagement in the future,' the group said in a statement. 'Financial services is a catalyst for growth across all sectors and must continue to be a central focus of the conversation.'
US financial services companies and the US government have said China needs to open its financial services market to further competition, which will help drive the development of China's domestic economy.
pete.kasperowicz@thomsonreuters.com
pik/tlm/wash
COPYRIGHT
Copyright Thomson Financial News Limited 2007. All rights reserved.
The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
