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While the world contends with the COVID-19 crisis and its economic and financial impact, China is quietly opening its doors to its financial sector, inviting more foreign financial institutions, banks, insurance providers and other financial service companies to set up shop in China.

On March 27, the Chinese government granted approval for both The Goldman Sachs Group Inc. and Morgan Stanley to obtain majority ownership interest over their Chinese subsidiaries, demonstrating China's commitment to open its financial sector to foreign players.

China had discussed opening up its financial sector for years. In 2016, it abolished the old foreign investment approval system, which requires governmental approval for foreign direct investments in any industry not specifically permitted and changed it to a filing system under which all sectors were opened up for foreign direct investments except for certain specific industries set forth on the so-called negative list.

In 2018, China announced that it was going to relax the restrictions on foreign investment in the financial sector and subsequently adopted a series of rules and regulations easing restrictions, including:

• Allowing foreign securities companies to own controlling stakes in joint ventures;
• Allowing foreign banks to distribute, redeem and underwrite government bonds;
• Quadrupling daily quotas for mutual stock market access between mainland China and Hong Kong; and
• Allowing foreign investors to own up to a 51% ownership interest in domestic futures brokers.
  
  

On July 20, 2019, the Office of Financial Stability and Development Committee under the State Council published the Relevant Measures for Further Opening Up the Financial Sector, or the 11 measures,1 which were viewed as a significant step taken by the Chinese government to further open its financial sector.

The 11 measures target almost all the financial subsectors and provide greater market access to foreign investors.

Highlights from the 11 measures include:

Ownership Caps Removal Deadlines

Setting deadlines for removing foreign equity ownership caps in securities, fund management, futures, and life insurance sectors in 2020, a year earlier than the deadline previously published.

Read the full alert here.