China Moving to Ease Rules on Foreign Participation in Financial Services

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China is moving to raise its global competitiveness by loosening restrictions on foreign investment in more manufacturing and services sectors, the country’s top regulator said.

In a draft foreign investment catalog China’s National Development and Reform Commission (NDRC) cut the number of sectors where China limits foreign investment to 35 from 79, opening up areas such as real estate, steel, oil refining, paper making and premium spirits.

The draft catalog, the latest revision of a list first distributed in 2011, also removes restrictions on foreign participation in some financial services, including finance companies and insurance brokerages, which are still subject to Chinese regulations.

Beijing, however, will continue to bar foreign investment in 36 key sectors, the draft said, with Chinese legal affairs consulting, tobacco and cultural relics businesses added to the list.

The NDRC said that the measures were aimed at adapting to a more globalized economy and would help China actively hasten its “opening up” process and improve transparency.

“This is kind of piecemeal,” said Todd Wang, an attorney at DLA Piper, who specializes in US-China business transactions. “[The draft list] represents what has been happening over the past few years.”

The European Union Chamber of Commerce in China said the draft catalog fell short of expectations and appeared “to be another incremental development” for some foreign firms.

“The removal of the investment catalog altogether, in favor of a short negative list, and increased opening in the service sectors, would have been more ambitious,” the European Chamber said in a statement.

Beijing is keen to improve China’s inefficient state-owned firms by adopting market friendly policies to stave off slowing growth. But despite plans for reform of state-owned enterprises, the government has also been reluctant to cede too much control over the economy.

“The focus will be on opening up manufacturing and services sectors to the outside,” the NDRC said in a statement on its website, adding that the move would help boost China’s international competitiveness.

“Allowing foreign investment to enter industries with overcapacity and outdated technology can accelerate efforts to upgrade the industrial structure through market competition,” Long Guoqiang, an NDRC researcher, told the official Xinhua News.

The NDRC is seeking feedback on the proposed revisions until Dec. 3, it said. China has issued a similar list since 1995 and has been revising it every three years. The current version was issued in 2011, state news agency Xinhua said on Tuesday.

In total, the draft lists 349 sectors that welcome foreign investment, including vocational training, homes for seniors, and services for children and the disabled.

(Reporting by Adam Jourdan, Matthew Miller, Michael Martina and Beijing Newsroom; Editing by Eric Meijer)