Abstract:

Despite of trade frictions, upgraded unilateralism and protectionism, China has remained committed to expanding opening-up by continually easing market access. Recently, National Development and Reform Commission and Ministry of Commerce promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access (2019 Edition) and the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2019 Edition), along with Industry Catalog for Encouraging Foreign Investment (2019 Edition), aiming at relaxing restrictions on foreign investment access in further fields. Constructing Shanghai International Finance Center is currently one of China’s major strategies. During the process of opening-up and developing the International Financial Center, China is also progressing towards industrial development, economic growth and trade prosperity. Broadening the access of foreign investment helps further promote high-quality and large-scale development of the capital market, develop a creative, flexible and open regional market.

Key Words:

Negative List; Foreign Investment Access; Expanding Opening-up; Financial Regulation Flexibility

“Two Lists” and “One Catalog” promulgated to advance opening-up

On June 30, the National Development and Reform Commission and the Ministry of Commerce promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access (2019 Edition) and the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2019 Edition), to substitute for the Special Administrative Measures (Negative List) for Foreign Investment Access (2018 Edition) and the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2018 Edition). On the same day, the National Development and Reform Commission and the Ministry of Commerce also released the Industry Catalog for Encouraging Foreign Investment (2019 Edition), which aimed at encouraging foreign investment in advantageous industries. The two ‘Lists’ and one ‘Catalog’ became effective on July 30, 2019.

The two ‘Lists’ relax restrictions on foreign investment access in fields such as service industry, transportation, infrastructure, culture, agriculture, mining and manufacturing. Under the Special Administrative Measures (Negative List) for Foreign Investment Access (2019 Edition), the number of List Items decreased from 48 to 40, by 16.7%. Under the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2019 Edition) which was promulgated on the same day, the number of Items decreased from 45 to 37, by 17.8%. In recent years, China has initiated a new round of opening-up with the intent to establish a new supply-side pattern of overall opening and advancing structural reform, with the economic construction target transforming from rapid development to high-quality development. Upon repeated revision, the Foreign Investment Access Negative List appears in a new edition almost every year. Restrictive measures retained in the 2018 Edition were roughly a quarter of those in the 2011 Edition, demonstrating that the situation of the manufacturing industry basically opened while the service industry and other fields opened in an orderly manner. The Industry Catalog for Encouraging Foreign Investment (2019 Edition) consists of the ‘National Industry Catalog for Encouraging Foreign Investment’ and the ‘Central and Western Regions Advantageous Industry Catalog for Foreign Investment’. Specifically, the ‘National Industry Catalog for Encouraging Foreign Investment’ lists various advantageous industries where foreign investment access has been eased, while the ‘Central and Western Regions Advantageous Industry Catalog for Foreign Investment’ uses different regions as the chapter titles and details industries encouraging foreign investment in different regions. The promulgation of the Foreign Investment Law and various policies promoting foreign investment, serving as the new impetus of opening-up, has strengthened the confidence of foreign companies for investing in China. According to the report of the American Chamber of Commerce in China, 90% of the enterprises investing and operating in China achieved profitability or balance of payments in 2018. The survey of the European Union Chamber of Commerce in China showed that in 2018, 62% of the enterprises considered China one of the top three investment destinations for the time being and in the future.

China maintains its stance of opening-up

Currently, owing to trade frictions, economic globalization is hindered by unilateralism and protectionism, but China has remained committed to the principle of expanding opening-up by continually easing market access. In the past several days, China and the United States resumed trade negotiations at the G20 Summit. China steadfastly demanded the United States to lift the ban on Huawei and remove all punitive tariffs. The situation of the trade war reversed and Trump declared that he would not impose new tariffs on Chinese commodities. As such, the increasingly intense tendency of the Sino-US trade war was temporarily inhibited. This result has been achieved because of China’s persistence in its stance during international negotiations in an effort to safeguard national sovereignty. It also represents the general trend. The Sino-US trade war damages both parties’ interests and is unlikely to go on for an extended period of time. In terms of economic cooperation, both countries can realize mutual benefits and win-win results only by maintaining opening-up. Except for circumstances under which major interests of the State are threatened, China has always maintained the principle of friendliness for common development with other countries, while unceasingly enhancing its own development. General Secretary Xi Jinping pointed out in his speeches delivered at the China International Import Expo in Shanghai and the G20 Osaka Summit that China would steadfastly carry out the mutually beneficial and win-win strategy of opening-up in order to embrace development opportunities and seek mutual benefits and win-win results with better cooperation. Premier Li Keqiang also required at the Bo’ao Forum for Asia 2019 that the Negative List be cut rather than added. In the revised 2019 edition of the Negative List for Foreign Investment Access, the principle of promoting all-round multiple-field opening-up is implemented, new opening-up measures are launched in service industry fields such as transportation, value-added telecommunication, infrastructure and culture, and foreign investment holding or solely operating is allowed in more fields, thus seeking to achieve unified supervision of Chinese and foreign investment, keep risk-controllable fields out of the Negative List, and cancel access restrictions exclusively targeting foreign investment in fields where equal treatment of Chinese and foreign investment is possible by continually improving various systems in order to achieve fair competition among different market subjects. China firmly believes that through larger-scope investment cooperation, a dynamic market system can be developed for common development, mutual benefits and win-win results.

Reviewing the financial industry’s process of opening-up

In the context of ongoing advancement in opening-up in various fields across China, the financial industry has continuously contributed towards opening-up. Under the Industry Catalog for Encouraging Foreign Investment (2019 Edition), Jilin Province explains in the Local Catalog that foreign investment is encouraged in the automobile financial service industry. Judging from the financial industry’s development history, it is easily found that the development of the financial industry is closely connected with opening-up.

Since 2017, the banking, securities and insurance industries have promulgated various measures in order to enhance the level of opening-up, expand the business scope of foreign financial institutions in China, and widen cooperation between Chinese and foreign financial institutions. In April 2018, the China Banking and Insurance Regulatory Commission promulgated 15 opening-up measures. Moreover, in May 2019, based on research on these measures, China Banking and Insurance Regulatory Commission launched 12 new measures for opening-up (hereinafter referred to as the ‘12 New Measures’). These measures have brought new vitality to the Chinese financial market, developed the roles of foreign financial institutions, and further improved the efficiency of the Chinese financial market.

The 12 New Measures cancel or ease requirements on overseas institutions in terms of asset scale and operation period, benefiting overseas banks, trust companies, insurance companies and insurance brokerage companies.

Regarding the principle of fair treatment of Chinese and foreign investment, the 12 New Measures have cancelled the upper limit of the proportion of shareholding in a Chinese commercial bank by a single Chinese-funded bank and a single foreign-funded bank. China Banking and Insurance Regulatory Commission promulgated the Decision of China Banking and Insurance Regulatory Commission on Repealing and Amending Some Rules (Exposure Draft) (hereinafter referred to as the ‘Decision’). In Article 2 thereunder, restrictions on the proportion of shareholding in a Chinese bank by foreign investment under the Implementing Measures for the Administrative Permission Matters of Chinese-funded Commercial Banks are cancelled, and regulations concerning the following under these Implementing Measures are deleted: a single overseas financial institution and its affiliated parties as the initiator or strategic investor should not invest in a single Chinese commercial bank at a shareholding proportion of over 20%, and several overseas financial institutions and their affiliated parties should not invest in the said institution at a shareholding proportion of over 25%. As explained by Xiao Yuanqi, the news spokesman of China Banking and Insurance Regulatory Commission, this measure is different from last year’s Decision in that following the promulgation of last year’s measures, qualified investors could hold shares of large banks without any restriction on the shareholding proportion, while major shareholders including strategic investors generally could not hold shares at a proportion of over 20%, whereas qualified investors could invest in small and medium-sized commercial banks such as joint-stock banks and city commercial banks. The cancellation of the upper limit of the proportion of shareholding in small and medium-sized commercial banks such as joint-stock banks and city commercial banks by a single Chinese-funded bank and a single foreign-funded bank has laid a foundation for interbank merger, acquisition and reorganization.

In terms of bank asset scale, requirements for investors’ asset scale reaching a corresponding amount are cancelled. The 12 New Measures point out as follows: “Cancel the requirements that foreign banks seeking to establish foreign-funded legal person banks in China shall have total assets of USD 10 billion and that foreign banks seeking to establish branch banks in China shall have total assets of USD 20 billion.” Previously, under the Regulations on the Administration of Foreign-funded Banks (2014), it is stipulated in Article 10 that foreign banks planning to establish a wholly foreign-funded bank, as the sole shareholder or the controlling shareholder, shall “have the total assets of not less than USD 10 billion at the end of the year prior to the submission of the application”. It is stipulated in Article 11 that foreign banks planning to establish a Chinese-foreign joint venture bank, as the sole shareholder or the controlling shareholder, shall also “have the total assets of not less than USD 10 billion at the end of the year prior to the submission of the application”. It is stipulated in Article 12 that the foreign bank planning to establish a branch bank shall “have total assets of not less than USD 20 billion at the end of the year prior to the submission of the application”. Recent years have seen a slight reduction in the number of foreign banks establishing wholly foreign-funded banks and branch banks in China. One of the reasons is that some foreign banks have failed to meet the total assets scale of USD 10 billion and USD 20 billion. The implementation of new measures will attract more foreign banks to operate in China, thus improving the diversification of China’s banking institutions. In particular, the introduction of foreign banks at a relatively small overall size but with unique characteristics will infuse new strength into China’s banking industry. Reducing requirements for assets scale does not compromise regulatory standards applicable to foreign banks, but represents regulators’ emphasis on foreign banks’ business operation ability, quality and effectiveness.

In terms of establishing Chinese-foreign joint venture banks, Article 6 of the 12 New Measures proposes as follows: “Ease restrictions on Chinese shareholders of Chinese-foreign joint venture banks, and cancel the requirement that the sole or principal Chinese shareholder shall be a financial institution.” Previously, it is stipulated in Article 11 of the Regulations on the Administration of Foreign-funded Banks (2014) that the sole or principal Chinese shareholder planning to establish a Chinese-foreign joint venture bank shall be a financial institution. Article 6 of the 12 New Measures targets Chinese shareholders of Chinese-foreign joint venture banks. In other words, Chinese non-financial institutions can also become a shareholder of Chinese-foreign joint venture banks. Several Chinese-foreign joint venture banks were established in China at the beginning of reform and opening-up. However, after the honeymoon period, some of them turned into wholly foreign-funded banks with foreign investment acquiring all Chinese-funded shares, e.g. BNP Paribas (China) Ltd., and some of them turned into city commercial banks with foreign investment quitting or transferring shares, e.g. Xiamen International Bank and Ningbo Commerce Bank. As such, I believe that the relaxation on the qualification of Chinese and overseas shareholders of Chinese-foreign joint venture banks under the New Measures will perhaps result in an increase of the establishment of joint venture banks.

In terms of expanding foreign investment business scope, Article 11 of the 12 New Measures proposes as follows: “Cancel approval of foreign-funded banks’ RMB business, and allow foreign-funded banks to operate RMB business as soon as they start operations.” It had been put forward in the ‘15 Measures’ previously promulgated by the China Banking and Insurance Regulatory Commission: “Expand the business scope of foreign-funded institutions, including thoroughly cancelling the requirement for the waiting period of one year after operations are started for foreign-funded banks to apply for RMB business”. Foreign banks were allowed to apply for the operation of RMB business while applying for the starting of operations, but approval was still required. The New Measures have further cancelled the approval link, allowing foreign-funded banks to simultaneously operate RMB business upon starting operations. However, it is unknown if foreign-funded banks that had started operations earlier without RMB business can directly start RMB business. It is put forward in Article 12 of the 12 New Measures: “Allow Foreign-funded Banks to operate “agency collection and payment” operations.

According to Articles 29 and 31 of the Regulations on the Administration of Foreign-funded Banks (2014), foreign-funded banks can operate the following business upon approval: (1) receiving deposits from the general public; (2) granting short-term, medium-term and long-term loans; (3) handling acceptance and discount of negotiable instruments; (4) buying and selling government bonds and financial bonds, buying and selling foreign currency securities other than stocks; (5) providing letter of credit services and guaranty; (6) handling Chinese and foreign settlement; (7) buying and selling foreign exchange and acting as an agent for the purchase and sale of foreign exchange; (8) acting as an agent for insurance companies; (9) engaging in inter-bank lending; (10) engaging in bank card operations; (11) providing safe deposit box services; (12) providing credit information services and consultancy services; and (13) other operations approved by the Banking Regulatory Agency of the State Council. The ‘15 Measures’ allowed branches of foreign-funded banks to engage in “issuing and accepting government bonds as an agent, and underwriting government bonds”, and reduced the threshold for branches of foreign-funded banks to receive a single RMB retail fixed time deposit to RMB 500,000. The New Measures allow foreign-funded banks to further expand their business scope and enter more fields including that of procuring government financial services.

In terms of trust companies, the requirement that the total assets of an overseas shareholder shall at least reach USD one billion has been cancelled. Article 3 of the 12 New Measures stipulates as follows: “Cancel the requirement that the total assets of an overseas financial institution shall reach USD one billion if it plans to invest in a trust company as a shareholder.” In China, regulators’ requirements for trust companies resemble those for financial institutions and tend to be strict. It is regulated in Article 9 of the Implementing Measures for the Administrative Permission Matters of Trust Companies (2015) that an overseas financial institution, as an investor of a trust company, shall concurrently meet the following conditions: “its total assets at the end of the latest accounting year shall not be less than USD one billion in principle” and “a single investor and its affiliated parties shall not invest and hold shares of more than two trust companies, of which it shall maintain majority shareholding of no more than one trust company”. The New Measures have cancelled the requirement of total assets of USD one billion on overseas shareholders of trust companies, broadening the access scope for overseas investors of trust companies. However, the New Measures have not defined specific types of “overseas financial institutions”. In practice, definition of financial institutions in China is strictly limited to financial institutions licensed by the People’s Bank of China, China Banking and Insurance Regulatory Commission, or China Securities Regulatory Commission. There are still disputes over whether or not local financial assets management companies, financing assurance companies and private equity fund management companies are financial institutions. People tend to understand overseas financial institutions in two ways: 1) financial institutions supervised by regulators who have signed a regulatory cooperation MOU with China Banking and Insurance Regulatory Commission, and 2) institutions licensed by overseas regulators who have signed a MOU with China Securities Regulatory Commission or the People’s Bank of China, e.g. securities companies. Practical application is still necessary for confirming which of these is the correct definition. 

In terms of insurance companies, Article 4 of the 12 New Measures stipulates as follows: “Allow overseas financial institutions to become shareholders of foreign-funded insurance companies in China.” Previously, Article 2 of the Regulations on the Administration of Foreign-funded Insurance Companies (2016) stipulates that foreign-funded insurance companies include the following: 1. Insurance companies formed within China by foreign insurance companies and Chinese companies or enterprises in the form of equity joint ventures, i.e. joint venture insurance companies; 2. Insurance companies formed within China by foreign insurance companies with foreign capital, i.e. wholly foreign-funded insurance companies; 3. Branches within China of foreign insurance companies. This shows that foreign insurance companies were the only foreign-funded companies intending to become shareholders of foreign-funded insurance companies in China. After the New Measures took effect, non-insurance financial institutions can also become shareholders of foreign-funded insurance companies in China, which enriches the fund source channels of foreign-funded insurance companies in China by broadening their types of investors. However, after the New Measures are officially implemented, in order to guarantee the companies’ professionalism, major shareholders of foreign-funded insurance companies in China will still mainly be insurance companies.

In terms of insurance brokerage companies, Article 5 of the 12 New Measures put forward are as follows: “Cancel the requirement that foreign insurance brokerage companies planning to operate insurance brokerage in China shall have total assets of not less than USD 200 million with an operation period of 30 years.” Previously, foreign insurance brokerage companies applying to establish foreign-funded insurance brokerage companies were required to meet the following conditions: 1. has conducted insurance operations for over 30 years; 2. has established  representative institutions within China; 3. with year-end total assets of over USD 200 million within four years after China entered the WTO; 4. the country or region of the foreign insurance brokerage company has a complete insurance regulatory system, and the relevant foreign insurance brokerage company is effectively regulated by the country or region’s competent authorities; 5. the country or region’s competent authorities consent to the application; 6. other prudent conditions stipulated by China Insurance Regulatory Commission. On April 27, 2018, to further expand the opening-up of the insurance industry and promote the development of the insurance brokerage industry, China Banking and Insurance Regulatory Commission promulgated the ‘15 Measures’ to align the business scope of foreign-funded insurance brokerage companies with that of Chinese-funded institutions. The New Measures have further cancelled relevant requirements for foreign insurance brokerage companies, i.e. the period of insurance brokerage operations in China and total assets.

In terms of consumer finance companies, for the principle of equal treatment of Chinese and foreign investment, access policies for Chinese-funded and foreign-funded financial institutions planning to invest and establish consumer finance companies have been concurrently relaxed. Previously, according to Article 8 of the Pilot Administrative Measures for Consumer Finance Companies (2013), compared with a Chinese financial institution, an overseas financial institution, as a principal investor of a consumer finance company, shall additionally meet the conditions of “having established a representative office within China for more than 2 years or having established branches, having thoroughly analyzed and researched the Chinese market, and its country or region’s financial regulators having developed a positive regulation cooperative mechanism with China Banking Regulatory Commission”. Following the relaxation of conditions for foreign investment to establish institutions under the ‘15 Measures’, implementing this measure means that Chinese and foreign financial institutions planning to invest in a Chinese consumer finance company have to meet equal conditions. Nowadays, China’s largest consumer finance company is the Czech consumer finance company Home Credit, which has a total scale of hundreds of billions of RMB.

More flexible policies expected to be rapidly implemented in the financial industry

The Special Administrative Measures (Negative List) for Foreign Investment Access (2019 Edition) and the Special Administrative Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2019 Edition) feature the same regulations for the financial industry, as follows:

The shareholding proportion of foreign investment in a securities company shall not exceed 51%. The shareholding proportion of foreign investment in a securities investment fund management company shall not exceed 51% (The restriction on the shareholding proportion of foreign investment will be cancelled in 2021).

The shareholding proportion of foreign investment in a futures company shall not exceed 51% (The restriction on the shareholding proportion of foreign investment will be cancelled in 2021).

The shareholding proportion of foreign investment in a life insurance company shall not exceed 51% (The restriction on the shareholding proportion of foreign investment will be cancelled in 2021).

According to this Negative List, while the access restrictions on the shareholding proportion of foreign investment in banks has been relaxed, those in securities, futures and insurance companies will be implemented for another three years. Fortunately, the Lujiazui Forum that started on June 13 indicated positive developments for foreign investors eager to invest in Chinese financial institutions. Yi Huiman, Chairman of China Securities Regulatory Commission, pointed out in his speech at the Forum that his organization would firmly implement the strategic deployment of new-round high-level opening-up by the Party Central Committee at the core of President Xi Jinping’s policy, further expand opening-up, and implement relevant policies that largely relaxed restrictions on the shareholding proportion of foreign investment in securities, fund and futures industries. China Securities Regulatory Commission approved the establishment of three securities companies controlled by foreign investment, and was actively negotiating with many foreign-funded institutions who had submitted applications. China Securities Regulatory Commission would continue to implement several opening-up measures, one of which would be allowing, based on the principle of equal treatment of Chinese and foreign investment, overseas shareholders of joint venture securities and fund management companies to have access to the ‘share participating and controlling policy’. Yi Gang, President of the People’s Bank of China, also mentioned in his speech delivered at the Opening Ceremony of the Forum that in January 2019, in an effort to thoroughly implement General Secretary Xi Jinping’s important instructions given during his inspection tour to Shanghai in November 2018, the People’s Bank of China promulgated the Action Plan for the Construction of Shanghai International Financial Center (2018-2020) together with eight relevant ministries and commissions. Next, the People’s Bank of China would spare no effort in supporting Shanghai to fulfill the three major tasks for the new era as vested by the Party Central Committee, and focus on advancing several matters, one of which was to support the pilot cancellation (in Shanghai) of the upper limit of shareholding proportion of foreign investment in securities companies and fund management companies, thus expanding the operation scope of foreign-funded financial institutions. It meant that the upper limit of shareholding proportion of foreign investment will first be cancelled in Shanghai, thus preventing the regulation from taking effect three years later. It is fantastic news for many foreign investors who have long desired to invest in Chinese financial institutions.

At the Forum, specific to the international trend of opening-up, the leadership of the People’s Bank of China, China Banking and Insurance Regulatory Commission, and China Securities Regulatory Commission also emphasized the key content of opening-up of the financial industry. Constructing Shanghai International Financial Center is currently one of China’s major strategies as well as a significant task for the reform and opening-up of the financial industry. During the process of opening-up and developing the International Financial Center, a country or region is also progressing towards industrial development, economic growth and trade prosperity. Broadening the access of foreign investment helps further promote high-quality and large-scale development of the capital market, improve the status and ability of local capital markets in global resources allocation, develop a creative, flexible and open regional market, and transform the market into a place with highly concentrated capital, information and talent, thus contributing to constructing a first-rate International Financial Center in the country or region.

In an effort to support the healthy development of Shanghai’s securities market, commodity futures market and financial derivatives market, and actively support Shanghai’s implementation of major reform and opening-up measures for the capital market, China Securities Regulatory Commission and People’s Bank of China have also adopted a series of other measures, e.g. supporting the establishment of a Chinese and foreign currency integrated account system in the Shanghai Pilot Free Trade Zone; enriching product types of foreign exchange options; expanding market participants; supporting the development of ‘Silk Road’-themed bonds; launching derivatives using ‘Shanghai Gold’ as a benchmark price at Chicago Mercantile Exchange; relaxing access restrictions on foreign-funded banks for engaging in securities investment fund custody operations in China with reference to their parent banks’ asset scale and business experience; fully advancing the reform of Share H ‘entire circulation’; relaxing restrictions on private products managed by foreign-funded private securities investment fund managers for participating in transactions of ‘Shanghai-Hong Kong Stock Connect’ and ‘Shenzhen-Hong Kong Stock Connect’. These policies play a crucial role in the opening-up process of China’s financial industry.

Prospects of the opening-up of the financial industry

Numerous opening-up policies have been established for the financial industry. If these policies have a legal basis, foreign investors will not be concerned about entering China. The opening-up of China’s financial industry has many prospects.

China’s legislation and policy orientation have both represented ‘national treatment’ of foreign investment for investing and legally registering enterprises in China, demonstrating China’s determination to expand opening-up and actively using foreign investment. The access threshold for foreign investment should be gradually reduced. The substantial expansion of opening-up under the ‘12 Measures’ of China Banking and Insurance Regulatory Commission and the ‘Negative Lists 2019 Edition’ has coincidentally verified this point. Following the legislative intent and policy orientation, and comprehensively considering the future development prospects of China’s financial industry, we should follow the principle of equally treating foreign-funded enterprises within China and overseas non-financial institutions as well as Chinese enterprises and non-financial institutions. This principle can be mainly embodied in the restrictions on the proportion of shareholding in financial institutions. China already has the example of a foreign-funded enterprise being approved as a shareholder of a Chinese-funded commercial bank. On April 16, 2012, China’s first wholly foreign-funded bank, Bank International Ningbo, was restructured into a Chinese-funded city commercial bank (Ningbo Commerce Bank). One of its shareholders (Ningbo Asia Paper Tube & Carton Box Co. Ltd.) was a wholly foreign-funded enterprise invested by Sinar Mas Paper (China) Co., Ltd. (a private limited company registered in Hong Kong). The operation of this Bank has always met prudential regulation requirements for maintaining robust operation of the financial market. Hence, legislative bodies and regulatory departments can improve relevant laws, regulations and polices and relax access qualification requirements for shareholders of this type of banks, e.g. expanding the scope of sponsors of Chinese-funded commercial banks in Article 8 of the Implementing Measures of China Banking and Insurance Regulatory Commission for the Administrative Permission Matters of Chinese-funded Commercial Banks, and supplementing regulations for conditions for becoming shareholders of commercial banks under the Commercial Bank Law. In addition, regarding the 2019 Legislation Work Plan announced by the State Council, further opening-up can be implemented in relation to conditions for becoming shareholders of foreign-funded banks under Articles 10 to 12 of the Regulations on the Administration of Foreign-funded Banks. Otherwise, the result will be inconsistent law enforcement in the banking industry, which will tend to hinder the opening-up process of China’s financial industry.

In order to strengthen financial regulation flexibility, financial regulators can abandon the rigid access indicator of quantification and instead decide if they want to allow foreign-funded financial institutions to input capital based on the international principle of prudential regulation. Regulators can decide if they want to allow foreign-funded financial institutions’ establishment and development in China by evaluating their risk management and internal control. Law enforcement authorities for financial regulation should also clearly divide their responsibilities without switching them and reducing efficiency. The Banking Regulatory Commission and the Insurance Regulatory Commission have recently merged and still need to coordinate regarding labor division. Departments under the People’s Bank of China, China Banking and Insurance Regulatory Commission, and China Securities Regulatory Commission should strengthen cooperation and implement macro prudential regulation that applies to the entire financial industry.

Cross-border cooperation is another important aspect of opening-up of the financial industry. The opening-up of the financial industry is a global trend, and many countries have already achieved thorough opening-up of the financial industry. Due to this trend, it is an indispensable process for strengthening internal and external cooperation. Signing regulatory cooperation MOU with relevant overseas departments based on the principle of politeness and formality is a good method of cooperation. The only way to establish development channels for Chinese-funded and foreign-funded institutions in each other’s regional markets is to build a good foundation for cross-border cooperation.

Financial opening-up is an effective way to improve the vitality of the financial industry and improve its industrial competitiveness. It is also the only route for China to fulfill its commitments in the financial service field. In recent years, China has gradually expanded the extent of opening-up in the financial industry. In particular, they have relaxed their access policies in terms of insurance, securities and futures, demonstrating that this industry has closely followed the development path of opening-up. In the long run, along with the input of more foreign investment, China’s financial industry will embrace brand-new situations in fields such as service quality, cooperation achievements and innovation.