China will open up its financial sector, but only if other countries reciprocate, regulator says
Liberalisation must be based on principle of equality and mutual benefit, vice-chairman of banking and insurance watchdog says
China’s push to open up its financial sector to foreign banks and financial institutions will be based on the principle of reciprocity and will not reward protectionism by other countries, a senior regulatory official said on Saturday.
China wants to accelerate the process of opening up, but countries afraid of exposing their own financial sectors to competition would not benefit, Chen Wenhui, the vice-chairman of the China Banking and Insurance Regulatory Commission, told a forum.
Without naming any names, Chen said some countries had imposed restrictions on the overseas expansion of Chinese financial institutions, partly because their own banks were unable to operate freely in China.
“Our country’s opening must be based on the principle of equality and mutual benefit. It will not be carried out on a ‘one-size-fits-all’ basis, and should stress mutual benefit and reciprocity,” he said.
“For countries and regions that are afraid of opening and implement protectionism, their long-term competitiveness will definitely suffer as they only look at short-term gains.”
Central bank governor Yi Gang said last month that China would allow domestic and foreign firms to compete on an equal footing and would expand the business scope for foreign banks in China.
China has been put under heightened pressure by the United States over access to its markets, and has promised to allow foreign investors to enter into trust, financial leasing, and vehicle and consumer financing by the end of this year.
Chen said foreign banks accounted for just 1.3 per cent of China’s total banking assets at the end of last year, down from a high of 2.5 per cent previously.
“The market share has been falling recently, which is not a good thing,” he said.
Opening up the financial sector to foreign firms would improve domestic resource allocation and support the economy, he said, adding that some foreign financial institutions had already expressed intentions to set up operations in China or buy bigger stakes in their Chinese counterparts.
It would also encourage other countries to open up their financial sectors to Chinese entities, he said.
“Promoting the opening up of China’s financial industry to the outside world, and further improving the fairness and transparency of the domestic financial market will help create a more favourable policy environment for the overseas development of China’s financial institutions,” he said.