US-China trade deal touts financial sector wins, but there's a sense of deja vu

US President Donald Trump (right) and China’s Vice-Premier Liu He (left) shake hands as they sign the trade deal.
US President Donald Trump (right) and China’s Vice-Premier Liu He (left) shake hands as they sign the trade deal.PHOTO: AFP

WASHINGTON/HONG KONG (REUTERS) - The long-awaited US-China trade deal unveiled on Wednesday (Jan 15) touted new wins for US companies looking to access China's US$40 trillion (S$54 trillion) financial market, but many of the changes were already in the works even before the trade war ignited.

The deal, which was signed by US President Donald Trump at a White House ceremony attended by business leaders, promises improved access to China's financial services for banking, insurance, asset management, payment and fund management.

It aims to address a number of longstanding US complaints regarding investment barriers to China's financial sector, including foreign equity ownership restrictions, discriminatory regulatory requirements, and opaque licensing processes.

China, which has pledged for years to open up its financial services sector to more foreign competition, previously said the deal would boost imports of US financial services.

But to China-watchers, a key pledge made in the slim financial services section of the deal to scrap foreign equity limits on firms operating in China's securities, fund management, futures and insurance sectors by April 1 will feel familiar.

Last July, Chinese Premier Li Keqiang announced China would expedite by a full year its plans to allow 100 per cent foreign ownership in a raft of financial sectors - news that came just days after China and the United States agreed to restart trade talks.

This month, all foreign ownership limits in futures companies were scrapped, while China said last year that it would do the same for mutual funds by April 2020.

The deal could expedite by nine months a previous December 2020 deadline for removing foreign ownership caps on securities firms, which includes investment banking, underwriting and brokerage operations. Currently, foreign investment banks can own up to a 51 per cent stake in their China securities joint ventures.

A 51 per cent cap on foreign ownership in life insurance joint ventures was also removed this month, although Wednesday's deal could potentially expand the types of insurers that can set up wholly-owned ventures in the market.

 
 
 

Likewise, China's pledge on Wednesday to open up its payments system to US firms comes after China's central bank earlier this month said it had accepted an application from a unit of American Express regarding starting operations in China.

Ken Bentsen, chief executive officer of the Securities Industry and Financial Markets Association, which has criticised China in the past for failing to make good on previous promises to level the playing field, struck a cautious note on Wednesday's deal.

"We will examine this agreement closely including what it specifically means for our members in terms of its implementation and enforcement," he said in a statement.