EU Prods China to Relax Restrictive Bank Ownership Rules

March 22, 2011

The European Union is pressing China to relax restrictions on foreign ownership of its banks in order to gain wider access to the Chinese financial markets, the region’s Internal Markets Commissioner said on Tuesday.

Michel Barnier, in Beijing for a visit, said he had held talks with senior Chinese officials from the Finance Ministry and the central bank on the market-opening issues.

“We presented our requests to the Chinese authorities and the requests are being studied by the Chinese side,” Barnier told reporters. His comments in French were translated into Chinese.

“We remind them of our desire that European banks should go beyond the 20 percent limit and also for other companies to participate in wider areas,” he said.

China currently limits the share of a single foreign investor in a Chinese bank to 20 percent and treats banks as foreign if the total foreign share exceeds 25 percent.

Some large European financial institutions are keen to issue bonds in China and win licences to undertake market-making business, Barnier said.

European insurers are also gearing up for a bigger slice of the Chinese market, Barnier said.

“I think that they have well understood our commitment and our voluntary participation in economic development in China, and our desire for our companies to receive the same treatment as Chinese companies,” he said.

“I am confident that reciprocity will develop in coming months and coming years. We have no timeline at the moment. We are both patient and confident.”

Chinese officials have voiced confidence in the European economy and the euro, Barnier said, adding the bloc would take further steps to shore up its banking systems.

Barnier said he was also pushing for China to give European firms equal treatment in the government procurement process.

“For the procurement markets, the timeline that was given to us was that China’s third proposal for the GPA will be presented in November,” he said.

The government procurement agreement is a voluntary accord among some of the World Trade Organisation’s 153 members that pledge to give each other reciprocal access to government tenders and purchases.

China promised to become a member of the GPA when it joined the WTO in 2001, but like most other members it has not yet signed on.

China made an initial proposal in 2007, and its second offer in July 2010 was seen by trading partners as more acceptable because of its shorter 5-year phase-in and a greater number of central government bodies covered. That offer was still deemed to be too limited in scope.

(Reporting by Kevin Yao and Michael Martina)

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