Financial sector opens further

China plans to step up efforts to deepen reforms by granting more access to overseas companies and individuals to make investments in the country’s free trade zones, the latest in its efforts to further open up the financial sector for investors.

A total of 12 new measures covering securities, insurance and banking services will be adopted in the free trade zones to better support the development in the pilot regions and the nonfinancial sector, according to a guideline released by the State Council, China's cabinet, on Nov 23.

For instance, banks in free trade zones will be allowed to conduct yuan derivative businesses on behalf of overseas institutions, and qualified individuals will be allowed to invest in overseas securities directly in the pilot regions, according to the guideline.

These new measures, which will be first adopted in the country's 12 free trade zones, including Shanghai and Chongqing, could be gradually introduced to other regions after the government gains some experience.

Such efforts are expected to attract more overseas investors to China's financial market and promote the free flow of funds, Xu Zhong, director-general of the Research Bureau of the People's Bank of China, the central bank, said during a briefing on Nov 23.

The central bank will gradually shorten the negative list in the financial sector and further remove the caps on shareholdings by overseas financial institutions in sectors that require financial licenses, he said.

As part of earlier pledges to further promote opening-up, China has introduced a slew of measures to gradually grant more access to overseas investors and reduce red tape while striving to ensure financial stability.

Overseas financial institutions have started to apply for greater access after the government rolled out the guidelines.

Nomura Securities and JPMorgan Chase have sought permission to launch majority-owned brokerages in China, with an eye on gaining control of their joint ventures in China by lifting their stakes in the business to 51 percent.

On Nov 13, JPMorgan's application for the establishment of a foreign-invested securities company received positive feedback from the China Securities Regulatory Commission.

Zhang Xiaojing, a senior researcher with the Chinese Academy of Social Sciences, said the building of an open economic system means higher requirements to better regulate the financial sector.

The government needs to pay attention to prevent financial risks and make sure financial supervision capabilities can be matched with financial openness, Zhang said.