China’s financial sector holds growing appeal for foreign investment

In recent years, China has advanced the opening-up of its financial markets in an orderly manner, approving the establishment of a total of more than 100 foreign-funded financial institutions in fields including banking, insurance, securities, and payment and clearing.

In June this year, DBS Securities (China) Limited, China’s first securities joint venture controlled by a Singaporean-funded enterprise, received its business license from China Securities Regulatory Commission, thus being permitted to officially commence business operations in China.

The development of the controlling shareholder of DBS Securities (China) Limited, DBS Bank (China) Limited (DBS China), which is among the first wholly foreign-owned banks in China, the first participants in the Cross-Border Interbank Payment System (CIPS) for RMB, and the first banks designated by Shanghai International Energy Exchange to carry out overseas customer deposit management business, well reflects the course of opening-up in China’s financial sector.

“Over the past more than four decades, China has established a huge modern financial system, and its financial sector has enjoyed rapid development. During the course, China has opened up its markets step by step, achieving universally recognized results,” said Neil Ge, Chief Executive Officer (CEO) of DBS China, adding that foreign-funded financial institutions have witnessed fast growth of businesses in China.

China announced that it would significantly broaden access to its financial markets in 2018, and this round of opening-up surpassed that in 2001 when the country joined the World Trade Organization in terms of the breadth of licenses for financial services and the depth and speed of qualifications of businesses, pointed out a report on new opportunities generated by China’s financial opening-up released by the financial research center of McKinsey Greater China last October.

China’s importance and influence in the global economy and the global financial systems will continue to expand, which, combined with the accelerated implementation of the country’s measures for further opening up its financial markets, will make global investors and market participants more optimistic about the Chinese market, according to a research team from Deutsche Bank.

Since the country officially removed all items on the 2020 negative list for foreign investment access to its financial markets, wholly foreign-owned and foreign-controlled financial institutions have sprung up all over the Chinese market continuously.

On July 17, 2021, Ueda Yagi Money Broking (China) Co., Ltd., the first wholly foreign-owned money brokerage company on the Chinese mainland, officially opened for business.

A month before that, BlackRock, the world’s largest asset manager, became the first foreign asset management company that was licensed to start a wholly owned onshore mutual fund business in China. On July 1, 2021, BlackRock reported its first public offering product, which meant its first public offering fund will soon be unveiled.

China’s efforts to implement the Foreign Investment Law and its supporting rules and regulations and cut the negative list on foreign investment still shorter have created for foreign investors and foreign-invested enterprises a business environment that is based on market principles, governed by law and up to international standards, which impressed Tomoyuki Ota, chief economist at Japan’s megabank Mizuho Financial Group.

The law helps foreign-invested companies develop better in China and enables Chinese people to enjoy better services, said Ota, who believes that the continuous efforts of China to further open its financial markets are beneficial to both China and the world.

Financial opening-up signals the elevation of China’s opening-up to a higher level, and reflects further integration of the Chinese economic development into the global market, according to Wang Yifeng, an analyst with China Everbright Bank.

Speeding up opening-up helps China introduce new management experience, product system, and risk management techniques, and improve the capacity of China’s financial sector for serving the real economy, Wang said.

While expanding opening-up of the financial sector, China needs to enhance its risk prevention ability, strengthen macro prudential management, and make financial regulation more professional and effective, Wang added.