Financial opening accelerated

Foreign shareholding limitations are being scrapped in securities, asset management and futures firms by next year, a year ahead of schedule, according to the Financial Stability and Development Commission.

Only those who haven’t been paying enough attention, or who don’t subscribe to insightful newsletters, should be surprised by the announcement of 11 reform measures pledging to allow foreign capital access to more sectors including bond markets, insurance, asset management and pension funds. 

Other agencies followed up over the weekend. The China Securities Regulatory Commission said it is working quickly to roll out auxiliary measures to “fully implement the new policies”, according to Global Times.The China Banking and Insurance Regulatory Commission said it will fast track revision work concerning asset management firms to implement the new measures. 

Analysts said the moves show China’s commitment to globalization and opening-up to foreign companies in the financial sector. But they also pointed out that regulatory reforms will be needed to make sure “guests come in” after the “door is opened up”.  They also called for more regulatory oversight with the potential increase in foreign participation in the financial services sector.

Both viewpoints are valid. In our view, just because reforms are inevitable doesn’t mean their implementation will be smooth. But it is important to understand what is driving this change. It is partly the US-China trade war. It is mostly China’s longer-term agenda for lifting its people out of poverty and creating a middle-income country that can stand proudly in the global community and be a responsible member of it.

Having said that, investors need to be aware that a new, big window of opportunity is coming, and it’s coming fast, but they also need to be looking before they leap. Now is the time to start doing some more serious homework about how to take advantage of the opportunities that await. And the Greater Bay Area, China’s richest, most diverse, most privately owned, is the best place to start.

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