China's huge and fast-growing financial market and China's financial industry, which lacks financial deepening and long-term policy protection, have made great attraction to foreign financial consortia. Trying to enter China's financial market with the good opportunity of China's entry into WTO has always been the key direction of their efforts. US Secretary of Commerce william daley said that the Sino-US WTO negotiations fell on the most critical issues, such as banking and insurance and other financial services.
1On April 9, 1999, the Office of the United States Trade Representative unilaterally announced the so-called date of China's accession to the WTO and the protocol on open market reached by the United States. These measures, according to what the United States said when China joined the WTO, will be implemented. In fact, these so-called agreements in the United States are actually just asking prices, of which only the agricultural part is completely consistent, and the others have not been fully reached. The Office of the US Trade Representative unilaterally published a list of the so-called financial market openness after China's accession to the WTO. From this, we can see that the United States and China require the financial services industry to be specifically affected:
(1) Bank
The two countries will continue to negotiate on this project. However, China has agreed to join the WTO, and American banks can provide all foreign exchange services to foreign customers immediately. One year after China's entry into WTO, Chinese banks in the United States can provide foreign exchange services to customers, Sino-US joint venture banks will be allowed to operate, wholly foreign-owned banks will be allowed to operate for five years, and foreign banks will be allowed to operate RMB business within two years and financial retail business within five years.
(2) Securities industry
At present, China Securities will continue to open the B-share market, but A-shares should not be opened. The United States insists on opening the stock market. Regarding this requirement, China still insists that the liberalization of the financial sector must be gradual. If we don't do this, it will be further followed by the crisis in Southeast Asian countries.
(3) Insurance industry
After the United States requires China to join the WTO, the proportion of foreign shares in life insurance companies can be increased to 50%, and it will be increased to 565,438 0% after one year. Non-life insurance companies and reinsurance companies will be allowed to hold 5 1% equity in joint venture insurance companies and set up wholly-owned branches within two years.
As China's accession to the WTO will become a reality, China is making efforts to prepare for providing an open financial market:
(1) The Director of China Department has determined the opening schedule of RMB business. The speed of opening RMB business may exceed most people's expectations, and it is likely to open RMB business in all large and medium-sized cities in the "foreseeable future".
(2) After joining WTO, China will take the lead in opening RMB business of life insurance and property insurance; Accident insurance market. Because the capital market belongs to the securities industry, the opening speed will be relatively slow. On March 20th, Ma Yongwei, Chairman of the China Insurance Regulatory Commission, said that the opening of the insurance market in China is a foregone conclusion, and a number of foreign insurance companies will enter the China market in the near future.
(3) Foreign banks will be allowed to provide foreign exchange business for China customers one year after China's accession to the WTO, RMB business activities for enterprises two years later, and financial services for individuals in China five years later. This year, the People's Bank of China will cancel the geographical restrictions on the branches of foreign banks, and expand from the current 23 cities including Shanghai, Beijing, Tianjin and Shenzhen to all central cities. At the same time, it will formally approve Citibank Shenzhen Branch and Bank of Tokyo Shenzhen Branch to conduct RMB business.
(4) In terms of securities market, foreign capital is eager to enter, but the domestic securities market is not mature enough, and the RMB is not freely convertible, so it is unlikely to directly invest and open to the outside world. In recent years, the China Securities Regulatory Commission has suggested studying the possibility of establishing a Sino-foreign joint investment fund. We can consider entering in the form of foreign funds, and it is very likely to establish a Sino-foreign cooperative fund.
From the above analysis, we can already feel that after China's accession to the WTO, China's financial industry is facing great challenges in integrating with international finance:
(1) After China's financial industry has kept a high barrier to policy evaluation for a long time, the highly competitive market situation after joining WT O needs an adaptation process. Bankers in China reacted strongly to the opening of the banking industry, believing that it is very urgent to fully open the banking industry in the next five years. According to Lardy, a well-known China banking expert from the World Bank, it will take about ten years for China's banking industry to be ready to face the competition from foreign-funded industries without being in danger. First of all, China's banking system needs further market-oriented reform. At present, the four major state-owned commercial banks in China are all owned by the Ministry of Finance, accounting for more than 90% of the national bank assets. Shenzhen Development Bank is the only listed bank so far. Secondly, it is difficult to clear the non-performing loans of domestic banks within five years. The state plans to discount some debts or sell securities, but this process may take several years or even longer. Rebuilding the fragile banking system in China is an important prerequisite for the China government to allow foreign financial institutions to fully enter its market without causing domestic financial crisis.
(2) The financial service industry has always been in a relatively backward position in the sequence of China's industry opening, and it has a process of adapting to the competitive environment of international financial opening. China's financial industry must open its market to a limited extent to prevent the cost of the Asian financial turmoil from repeating itself in China.
(3) China's financial industry, especially state-owned commercial banks, accumulated a large number of non-performing loans in the past non-market operation, which made the American financial industry have a relatively heavy historical burden in the market competition.
Second, actively respond
(1) Expand the financial inspection of the assets and liabilities of financial institutions. In order to find out the Chinese government's further prevention of financial risks and meet the challenges faced by opening up the financial market, a five-month national financial inspection has been started, and the assets and liabilities of financial institutions have been comprehensively found out. The focus of the work is to check the financial situation of financial institutions and their non-performing assets, so that the regulatory agencies of financial institutions across the country can understand the real situation of debts. This will not only help regulators to effectively assess financial risks, but also take corresponding measures to gradually eliminate a large number of non-performing assets of financial institutions.
(2) Before opening the domestic market, the financial department in charge of China should reorganize the banks or inject more funds into them, so as to improve the management principles and the rule of law and establish an appropriate regulatory framework. Too soon, the risk of opening up the financial industry may be far higher than the power of foreign investment. China's domestic financial system, we should fully absorb the lessons of the Asian crisis: before financial liberalization, we must strictly regulate the domestic financial system, and commercial banks must have proper capital injection and management.
(3) Change ideas and face up to the great challenge of international financial integration. International financial integration is one of the inevitable trends in the development of the world economy, and our overall strategy of opening up the financial industry remains unchanged. It is only after China's accession to the WTO that this issue has been put in front of us earlier. China's financial industry, which grew up under the soil protection of monopoly in the past, should face up to the great challenge of international financial integration, carefully examine where its own attractions really have strong connotation and where our core competitiveness grows up, and actively respond to it.
First of all, China's accession to the WTO is a great challenge to China's financial industry.
China's huge and fast-growing financial market and China's financial industry, which have been protected by policies for a long time, have produced great attraction to foreign financial consortia. Trying to enter China's financial market through China's entry into WTO has always been the focus of their attention. U.S. Commerce Secretary Daley said that the most critical issue in China-U.S. WTO accession negotiations lies in financial services, such as banking and insurance.
1On April 9, 1999, the Office of the United States Trade Representative unilaterally announced the so-called market opening agreement that China has reached with the United States so far to join the WTO. According to the United States, these measures will be implemented when China joins the WTO. In fact, these so-called agreements are actually just the asking price of the United States, of which only the agricultural part has been fully reached, and the others have not been fully reached. The Office of the United States Trade Representative unilaterally published the list of so-called financial market opening after China's entry into WTO, from which we can see the specific asking price of the United States and the possible impact on China's financial industry:
(1) Bank
The two countries are still negotiating on this project. However, China has agreed that after China's entry into WTO, American banks can provide all foreign exchange services to foreign customers immediately. One year after China's entry into WTO, American banks can provide foreign exchange services to China customers, Sino-US joint venture banks will be allowed to operate immediately, wholly foreign-owned banks will be allowed to operate within five years, and foreign banks will be allowed to operate RMB business within two years and financial retail business within five years.
(2) Securities industry
At present, as far as securities are concerned, China insists that the B-share market will remain open, but the A-share market cannot. The United States insists on opening the entire securities market. For this requirement, China still insists that the opening of the financial sector must be gradual, otherwise it will follow the footsteps of Southeast Asian countries hit by the crisis.
(3) Insurance industry
After the United States requires China to join the WTO, the foreign shareholding ratio of life insurance companies can be as high as 50%, and it will increase to 5 1% one year after joining. Non-life insurance companies and reinsurance companies will be allowed to hold 5 1% shares in joint venture insurance companies, and wholly-owned branches can be established within two years.
With China's entry into the WTO becoming a reality, China is also preparing for opening its financial market:
(1) China authorities have drawn up a timetable for opening RMB business. The speed of RMB business opening may exceed most people's expectations, and it is very likely that RMB business will be opened in all large and medium-sized cities in the "foreseeable future".
(2) After China's entry into WTO, China will first open the life insurance and property insurance markets for RMB business. As for the securities industry, which belongs to the capital market, the opening speed will be relatively slow. On March 20th, Ma Yongwei, Chairman of the China Insurance Regulatory Commission, said that the opening of the insurance market in China has decided that many foreign insurance companies will enter the China market in the near future.
(3) Foreign banks are allowed to provide foreign exchange services to customers in China after 1 year, RMB services to enterprises after two years, and financial services to individuals in China after five years. This year, the People's Bank of China will cancel the geographical restrictions on the branches of foreign banks and expand them from 23 cities including Shanghai, Beijing, Tianjin and Shenzhen to all central cities. At the same time, Citibank Shenzhen Branch and Bank of Tokyo Shenzhen Branch will be officially approved to operate RMB business.
(4) In the securities market, foreign capital is eager to enter, but the domestic securities market is immature, the RMB is not freely convertible, and it is unlikely that foreign capital will directly enter. In recent years, the China Securities Regulatory Commission proposed to study the possibility of setting up a Sino-foreign cooperative investment fund. We believe that it is extremely possible to attract foreign investment in the form of a fund and set up a Sino-foreign cooperative fund.
From the above analysis, we can already feel the great challenge of international financial integration faced by China's financial industry after China's entry into WTO:
(1) China's financial industry has been under the protection of high policy barriers for a long time, and needs to adapt to the fierce market situation after joining WT O. Many domestic bankers have reacted strongly to the opening up of banking business. They think it is very urgent to completely open the banking industry within five years. Lardy, an expert of the World Bank who has a good understanding of China's banking industry, believes that it will take about ten years for China's banking industry to be ready to face the competition from foreign peers without getting into danger. First of all, the market-oriented reform of China's banking system still needs to be further deepened. At present, the four major state-owned commercial banks in China are owned by the Ministry of Finance, accounting for more than 90% of the national bank assets, and SDB is the only listed bank so far. Secondly, it is difficult to clear the non-performing loans of domestic banks within five years. The state plans to sell this part of the debt at a discount or securitization, but this process may take several years or even longer. Rebuilding China's fragile banking system is an important prerequisite for the China government to allow foreign financial institutions to fully enter the domestic market without triggering a domestic financial crisis.
(2) The financial industry has been in a late stage in China's industrial opening-up sequence, and it also has an adaptation process to the international financial competition environment after the opening-up. China's financial industry must open its market to the outside world to a limited extent to prevent the cost of the Asian financial turmoil from repeating itself in China.
(3) China's financial industry, especially state-owned commercial banks, accumulated a large number of non-performing loans in the past non-market operation, which made China's financial industry bear a heavy historical burden in the market competition.
Second, actively respond.
(1) Carry out financial inspection to find out the assets and liabilities of financial institutions. In order to further guard against financial risks and meet the challenges brought by the opening of the financial market, the China Municipal Government has started a five-month national financial inspection to find out the assets and liabilities of financial institutions comprehensively. The focus of the work is to check the financial situation of financial institutions and their non-performing assets, so that regulators can understand the real situation of the debts of financial institutions across the country. This will not only help the regulatory authorities to effectively assess financial risks, but also help to take appropriate measures to gradually eliminate the huge non-performing assets of financial institutions.
(2) Before opening the domestic market, China financial authorities should reorganize banks or increase capital injection, improve bank management policies, and establish an appropriate legal and normative framework. The risk of opening up the financial industry too quickly is that the strength of foreign capital may greatly exceed that of China's domestic financial system. We should fully draw lessons from the Asian crisis: before financial liberalization, the domestic financial system must be strictly regulated, and commercial banks must be properly funded and managed.
(3) Change ideas and face up to the great challenge of international financial integration. International financial integration is the inevitable trend of world economic development, and the grand strategy of China's financial industry opening to the outside world has not changed. Joining WTO only puts this problem in front of us in advance. China's financial industry, which grew up in the soil of monopoly protection in the past, should face up to the great challenge of international financial integration, carefully examine what it has to compete with truly powerful multinational companies, and where our core competitiveness lies, and make full use of its strengths and avoid its weaknesses and actively respond.