China Introduces Reformative Regulations as It Attempts to Open Up the Financial Sector

China recently introduced new financial regulations which it believes will make the financial sector more transparent and also make it friendlier to foreign investors and financial institutions.

One of the objectives of the latest regulations was to limit the financial risks inherent in the system. The government body overseeing the financial markets introduced some high handed measures to curb the financial irregularities. It had been intensifying the administrative penalties to limit the rules violations in key areas and had introduced diversified measures to guarantee their effective implementation in the past few years. Between 2017 and 2019, there has been a flurry of penalties and fines levied amounting to a total of 5.94 billion Yuan.

The recent regulations have further tightened the noose against institutions involved in such practices in the financial sector. The government hopes to send a strong signal to the violators across the financial sector with the latest regulations introduced and has clearly warned them of tough measures.

There are more reformative regulations on the way as hinted by the chairman banking and regulations commission in an interview. The new rules and regulations will be formulated after thorough research and evaluation that will go on to further open up the Chinese financial markets.

As a result, both local and foreign financial institutions will be able to benefit from widened entry policies when setting up or investing in financial companies in China.

Foreign banks will be able to conduct business in RMB transaction by default upon setting up and will not require additional approvals from the authorities. Furthermore, foreign-based banks will be able to provide payment services and engage in agency collection. The reformed regulations will also make foreign insurance brokerage businesses to operate in the local insurance brokerage markets. Moreover, the terms for setting up insurance institutions in China will also be eased.

Foreign financial institutions will now be allowed to hold stakes in foreign-financed companies doing business in China.

The reforms and new regulations are equally good for China as they will bring in further economic development opportunities besides enriching the financial sector.  It will encourage more financial and technological cooperation between Chinese and foreign companies and will go on to stimulate the local financial markets further.

All in all, the recent introduction of the reformative laws is a step in the right direction, which will open up the Chinese financial markets and help it to realize its true potential.