Since the beginning of this year, China’s financial opening process has been accelerated in all directions, from allowing foreign investors to increase their shareholding in joint venture securities firms in China to 51%, and then on June 1, A shares were officially included in the MSCI Emerging Markets Index (that is, "A shares entered Morocco").
Not only in the financial sector, in recent weeks, China has intensively introduced measures to expand opening up and promote economic upgrading, and the measures have been gradually deepened from point to point.
The first two topics of the the State Council executive meeting on May 30 are related to opening wider to the outside world: determining measures to further actively and effectively utilize foreign capital, and promoting opening wider to the outside world to promote economic upgrading; Decided to lower the import tariffs on consumer goods on a large scale to better meet the diversified consumption needs of the masses.
Although the scope involved is quite broad, people from all sides interviewed by China Business News generally said that among all the measures, they are most concerned about the content of the new negative list (that is, the new national version of the negative list of foreign investment and the negative list of foreign investment in the Pilot Free Trade Zone) and the landing of intellectual property protection measures. A senior observer in this field told the First Financial Reporter that the future focus will be on further opening up in three areas: service trade, investment and trade facilitation.
Since the beginning of this year, the United States has unilaterally provoked several rounds of trade frictions against China, and China has also taken corresponding countermeasures, which has aroused some people’s worries about China’s opening prospects. Business counselor He Weiwen, a researcher at the China Foundation for International Studies of the Ministry of Foreign Affairs and former China Consulate General in San Francisco and new york, told China Business News that facing the current international and domestic situation, China should do its best to attract foreign investment, attract foreign-funded enterprises and large enterprises to invest in China, and cooperate with overseas high-tech institutions.
Gao Feng, a spokesman for the Ministry of Commerce, said at a regular press conference on May 31 that the National Development and Reform Commission and the Ministry of Commerce are working with relevant departments to study and promote the introduction of a new negative list, which will not only include the announced opening-up measures in the financial and automobile fields, but also cancel or relax restrictions on foreign investment in the fields of energy, resources, infrastructure, transportation, trade circulation and professional services. At the same time, the new negative list will also list the opening measures in the next few years by giving the relevant industries a certain period of transition. At present, relevant work is being actively promoted, and the new negative list will be announced and implemented before June 30.
Foreign capital actively enters China’s financial market.
On June 1st, a total of 226 A-share large-cap companies were included in the MSCI Emerging Markets Index. According to the schedule published by MSCI, the first inclusion of A shares will be completed in two times on June 1 and September 3, 2018. The inclusion was completed on September 3rd, and the total proportion of A shares included was 5%, with a corresponding weight of 0.73%.
Although the initial inclusion ratio is small, it is a milestone. It is not easy for foreign investors to go from "A-share skepticism" to having to speed up their understanding of the China market and lay out the A-share investment research team, and then invest in A-shares with real money. "The China stock market is officially in line with international standards, which is the second milestone after the RMB was included in the SDR currency basket." Zhu Haibin, chief economist of JPMorgan Chase China and head of China stock strategy, told the First Financial Reporter.
On May 29th, Henry Fernandez, Chairman and CEO of MSCI, told the First Financial Reporter: "If overseas investors can enhance their understanding of the A-share market and their confidence in the A-share market with this small amount, it is expected that more international capital will enter the China market." Fernandez mentioned that after "testing the water", the proportion will be even greater in the future.
"Most of the global investors who have recently contacted are relatively optimistic about the situation in China, and believe that China’s economy has sufficient endogenous power and strong supervision is the right direction." Yu Xiaobo, head of China business and investment director of Hong Kong Huili Fund, told the First Financial Reporter.
Since the beginning of this year, foreign-funded institutions are also actively entering China. Recently, UBS, Nomura and JPMorgan Chase have successively announced that they have submitted application materials for the establishment of foreign-invested securities companies to the China Securities Regulatory Commission, and intend to hold 51% of the shares. This means that foreign investors may hold shares in joint venture securities firms, not just equity participation. On May 25th, China Business News reporter learned that after China opened its credit rating market to foreign institutions, foreign rating agencies including Standard & Poor’s and Fitch planned to set up their own independent companies in China.
The opening up of the insurance industry is also accelerating. Fuwei Life Insurance (Bermuda) Company submitted the application materials for the establishment of Fuwei Life Insurance, and Allianz Insurance Group decided to set up Allianz (China) Insurance Group in Shanghai, which will become the first joint-venture life insurance company and the first wholly foreign-owned insurance group company with a foreign shareholding ratio of 51% after China’s insurance industry is opened to the outside world.
Yi Gang, governor of the central bank, mentioned China’s financial opening again at the annual meeting of the 2018 Financial Street Forum on May 29th, saying that compared with the requirements of China’s economic and financial development, there is still a lot of room for the financial industry to open to the outside world and to the inside. Regardless of domestic or foreign investment, no matter what kind of ownership, as long as it can improve financial services, we must encourage entry, follow the principle of national treatment before entry and the opening of negative lists, treat all market players equally, and all can enter on an equal footing according to law and compete under the same conditions.
At the same time, Yi Gang stressed that financial opening is by no means an open door. In the process of opening up, financial management departments should strengthen financial supervision according to law, and insist on licensed operation.
Actively and effectively utilize foreign capital
Since the beginning of this year, various opening-up measures are gradually shifting from high-level vision to concrete implementation.
On April 10th, in the opening speech of the 2018 annual meeting of Boao Forum for Asia, the supreme leader of president, China described the vision of China’s opening to the outside world: the door of China’s opening will not be closed, but will only grow wider. In terms of opening wider to the outside world, China will greatly relax market access, create a more attractive investment environment, strengthen intellectual property protection and actively expand imports.
At that time, experts and insiders interviewed by CBN paid special attention to the statement made by the Supreme Leader in the above-mentioned speech: We will implement these major measures of opening up as soon as possible, sooner rather than later, sooner rather than later, and strive to make the fruits of opening up benefit enterprises and people in China and enterprises and people all over the world as soon as possible.
The executive meeting in the State Council on May 30th pointed out that it is necessary to create a fairer, more transparent and more convenient environment for foreign investment, promote the formation of a new pattern of all-round opening up, and strive to maintain China’s position as a major destination for global foreign investment. The meeting decided: first, relax market access. Implement the clear commitment to cancel or relax foreign investment access restrictions in manufacturing industries such as automobiles, ships and airplanes. We will improve the system of qualified foreign investors, actively introduce foreign traders to participate in futures trading such as crude oil and iron ore, and support foreign financial institutions to participate more in local government bond underwriting. The second is to improve the level of investment facilitation by benchmarking international. The revision and introduction of the negative list of foreign investment access should be completed before July 1 this year. The establishment and change of foreign-funded enterprises with a total investment of less than $1 billion in the list will be delegated to the provincial government for approval and management. Simplify the permit procedures for foreign talents to work in China, and enterprises registered in China can obtain visas within 2 working days if they choose qualified foreign talents. The third is to protect the legitimate rights and interests of foreign capital. We will crack down on acts such as infringement and counterfeiting, infringement of trade secrets, and malicious cybersquatting of trademarks, and substantially increase the statutory compensation limit for intellectual property infringement.
A number of responsible persons in the field of foreign investment told the First Financial Reporter that this is exactly what foreign-invested enterprises in China are concerned about: market access (closely related to negative list), intellectual property protection and other core issues, but as in the past, enterprises are still waiting to see the specific landing and implementation.
The latest progress in the reform of intellectual property rights is that an informed source told the First Financial Reporter that the revision process of the patent law will be accelerated this year, and it is possible to complete the revision of the patent law within this year, and at the same time, the administrative law enforcement should be strengthened.
In the past two weeks, some technical and operational reforms and opening measures of decentralization and decentralization have been introduced first. The the State Council executive meeting held on May 16th decided that, in order to promote the convenience of attracting foreign investment, starting from June 30th, the "one set of forms, one handling" for business filing and industrial and commercial registration of foreign-funded enterprises will be implemented nationwide.
On May 23rd, the State Council issued the Notice on Copying and Promoting the Fourth Batch of Pilot Reform Experiences in Pilot Free Trade Zones, which proposed that the fourth batch of pilot reform experiences in Free Trade Zones formed after 11 pilot free trade zones fully promoted the practice of institutional innovation, including 27 reform items in the field of service industry opening, will be replicated and promoted nationwide. The the State Council executive meeting held on the same day decided to continue to deepen the pilot program in 17 regions, including Beijing, starting from July 1st this year, based on the pilot program of innovative development of service trade launched in 2016.
On May 24th, the State Council announced the reform plan for further deepening the pilot free trade zones in Guangdong, Tianjin and Fujian, proposing to promote reform, development and innovation through opening up, taking the lead in establishing an institutional system that is linked with international investment and trade rules, and forming a legalized, internationalized and convenient business environment.
In addition to measures to attract capital inflows, China has also expanded its imports by vigorously reducing tariffs and facilitating procedures.
In the past 30 years, China’s main import and export structure was still dominated by exports, supplemented by imports. With the development of the economy to a new stage, attention was paid to the role of imports in promoting the upgrading of the overall economy, which was gradually put on the agenda and accelerated in the past two years. According to the statistics of the World Bank, from 2011 to 2016, the share of China’s total imported goods and services in the global import market increased from 8.4% to 9.7%.
On May 30th, the executive meeting in the State Council decided to substantially reduce the import tariffs on some products from July 1st this year, ranging from 5.5 to 12.5 percentage points, including clothing, shoes, hats, kitchen and fitness products, washing machines, refrigerators and washing products.
On the same day, the General Administration of Customs issued a circular to further optimize the business environment and promote trade facilitation. According to relevant regulations, the Customs Clearance Form for Entry/Exit Goods will be completely cancelled.
Xu Ping, president of Henan Public Bonded Center Group Co., Ltd., told the First Financial Reporter that these measures are good for the import industry as a whole, and the main reason for the cancellation of the facilitation measures in the Customs Clearance Form for Entry/Exit Goods is the result of institutional reform, that is, the merger of the General Administration of Customs and commodity inspection.
In November this year, China will hold the first China International Import Expo in Shanghai. China’s initiative to open its market has received positive responses from countries and enterprises all over the world. By the end of April, nearly 1,100 enterprises from 101 countries and regions had officially signed contracts, with an exhibition area of over 180,000 square meters, and the total number of enterprises preparing to sign contracts had exceeded 1,800.
It is noteworthy that on May 28th, in order to cooperate with the related work of the first China International Import Expo and timely and accurately grasp the supply and demand of imported consumer goods, the Ministry of Commerce announced the recent supply and demand of major consumer goods. The survey results show that circulation enterprises and consumers have strong import will and consumption demand, and the import market has great potential in the future.
