BEIJING • Foreigners will be able to own larger stakes in Chinese financial firms under major reforms announced in Beijing yesterday that are aimed at making the nation a major global banking hub.
The move gives overseas firms a long-awaited chance to grab a bigger slice of the country's multitrillion-dollar financial service market. It comes a day after United States President Donald Trump reiterated calls for better access to Chinese markets in meetings with President Xi Jinping.
Mr Xi is driving economic reforms by opening up China's capital markets, internationalising the yuan and seeking technical know-how by pursuing massive inbound and outbound investments.
The changes, which take effect immediately, include raising the limit on foreign ownership in joint-venture firms involved in the futures, securities and funds markets to 51 per cent, from 49 per cent now.
Vice-Finance Minister Zhu Guangyao told a briefing that China is "formulating a timetable and road map for financial sector reform and opening up".
The foreign business community gave a cautious welcome to the news. "Financial services further opening definitely has been high on our list," said Mr Ken Jarrett, president of the American Chamber of Commerce in Shanghai.
"We will have to see the detailed rules. In China, you always have to pay attention to the fine print to see how quickly it moves, but to finally ease up on the cap is something that is welcome."
Mr Peter Alexander, managing director of Z-Ben Advisors, a Shanghai-based consultant for the fund industry, sees the move as a measured step towards bigger changes down the road.
51% The new cap on foreign ownership of joint-venture firms in the futures, securities and funds markets.
"This is part of a methodical and deliberate process. We fully expect foreign asset managers at some point in the next several years to have full control of their own ventures."
The plan to ease ownership curbs comes as Beijing faces mounting pressure from Western governments and business lobbies to remove investment barriers and onerous regulations that restrict overseas companies' operations.
Foreign firms are still small players in the financial sector, but the sheer size of the market is a big lure for overseas players.
Foreign banks account for just 1.4 per cent of the total 181.7 trillion yuan (S$37.2 trillion) of banking assets in China, according to a 2017 study by KPMG.
Swiss bank UBS, which holds a 25 per cent interest in domestic firm UBS Securities, said the changes were an important step in further opening up China's financial sector.
A spokesman for JPMorgan, which sold its 33.3 per cent stake in its China securities JV to First Capital last December, said the firm "welcomes any decision made by the Chinese government that looks to liberalise its financial sector further".
Some industry watchers said the changes are too little too late. Mr Keith Pogson, head of the Asia financial services team at EY, said: "If you are an international investment bank, you will be there for the sake of your global franchise and having it as part of your network, not because you think you will make much money in China."
Among the Singapore banks, OCBC Bank has a 20 per cent stake in Bank of Ningbo, which has around 300 branches, sub-branches and offices across the country.
OCBC chief financial officer Darren Tan said: "The continued liberalisation of China's financial services sector is directionally positive."
OCBC's insurance subsidiary Great Eastern Holdings has a representative office in Beijing.