Top Five Considerations for Foreign Banks in China

On November 10, China’s Vice Finance Minister Zhu Guangyao said at the information meeting in Beijing that China has decided to further open its financial services industry. In addition to the committed liberalisations of the foreign shareholding restrictions in domestic securities, future, fund management and life insurance  companies, of particular interest is that qualified foreign banks will be allowed to hold the same percentage as Chinese investors can hold in Chinese domestic banks and asset management companies.

As of today, there has been no further clarification or clear indication as to when this would be formalised and what percentage (above the current 20% and 25% limits) the foreign banks can hold in Chinese domestic banks and asset management companies, but if you are looking keenly at this development, these are the top five questions you need to start considering:

  1. Is your joint venture partner ready to relinquish control of its business or let you buy it out?
  2. How prepared are you for an equal share joint venture/to take majority interest/to take complete control?
  3. Will your investment be made via headquarters or through your locally-incorporated subsidiary bank?
  4. If you have not already set up your own locally-incorporated subsidiary bank, how will your fast-track look like?
  5. Since the new rules have not been formally passed, how important is it to lock up minority interest now with an option to increase to the allowed threshold

Regulators are still in the process of drafting new rules, which will likely be released soon. The new rules will impact several other laws and regulations including the NDRC/MOFCOM Catalogue of Industries for Guiding Foreign Investment (2017 Revision); and the CBRC Implementation Measures for the Administrative Licensing Items concerning Chinese-Funded Commercial Banks (2017).

Regulation Tomorrow is keeping a close eye on the legislative development and aims to keep you posted. Please visit Regulation Tomorrow for updates on this matter.