China pledged in late 2017 to allow overseas financial firms greater access to its economy, the world’s second-largest. Then came the trade war with the U.S., raising concerns that Chinese President Xi Jinping might retaliate by going back on his vow. The country’s top financial regulators say the opening is continuing. But that doesn’t mean that foreign companies are going to rush in at full speed. And some barriers have more to do with red tape or close relationships among Chinese firms and officials than with the written rules.

1. How far has China gone?

China’s regulator in 2018 began allowing overseas firms to apply for majority stakes in securities and mutual-fund management ventures. Foreign companies were allowed to take controlling stakes in life insurers starting in July that year, and foreign-ownership caps on banks were lifted a month after that. In 2019, China opened the door for full-blown local bank takeovers by lifting single-shareholder limits and scrapped some asset requirements for foreign companies to operate in China. Foreign companies also now can be lead underwriters for all types of bonds, and can control entities including wealth management firms, pension fund managers and inter-dealer brokers.

2. What’s still to come?

China says that full foreign ownership of securities firms, futures firms and life insurers will be allowed by 2020, but there’s no framework for that to take effect. And there are plenty of hidden barriers to entry, including the challenge of cracking a market dominated by government-controlled rivals that have longstanding relationships. In sectors including banking, insurance and brokerage, local companies have a market share of more than 90%. The lengthy and often opaque application process also can deter foreign investors. Visa Inc. and Mastercard Inc., for example, have been waiting for years to gain entry after Beijing opened the bank-card clearing sector in 2015.

3. What’s the lure?

Access to China’s $44 trillion financial sector. Even a sliver can be lucrative. Bloomberg Intelligence estimates that -- barring a major economic slowdown or change of course -- foreign banks and securities companies could be raking in profits of more than $10 billion a year in China by 2030.

4. Are there reasons for caution?

Yes, and not every opening is met with unrestrained enthusiasm. In September, regulators scrapped a quota system for foreign investment in China’s stock and bond markets, allowing global funds to simply register before purchasing assets. But foreign investors had taken up only a third of the quota that had been available the month before.

5. Which firms are interested?

UBS Group AG, JPMorgan Chase & Co. and Nomura Holdings Inc. have all won approval from regulators for majority control of their local securities joint ventures, and Goldman Sachs Group Inc., Morgan Stanley, and DBS Group Holdings Ltd. have applications pending. Credit Suisse Group AG has agreed to acquire shares from its local securities joint venture partner for a majority stake, and Citigroup Inc. is said to seek a majority-controlled venture. German insurer Allianz SE got the green light in November to set up the first wholly foreign-owned insurance holding company in China, while Standard Life Aberdeen Plc will provide pension insurance through its local joint venture. American Express Co. was the first foreigner to win approval to build a bank-card network in China, partnering with LianLian Group. Mastercard has applied for a joint-venture license with Beijing-based NetsUnion Clearing Corp. S&P Global Ratings was approved to do business on the mainland through a local unit in January, while Moody’s Corp. is said to be seeking control of China’s largest credit-ratings firm, Chengxin International Credit Ratings Co.

6. What’s in it for China?

The benefits may be twofold: U.S. President Donald Trump accuses China of being a one-sided beneficiary of global commerce, so opening up makes the game seem fairer. And Chinese leaders have long said opening is necessary to improve the quality and sophistication of the domestic industry, make capital allocation more efficient and attract foreign investment. Foreign players also can help improve competitiveness in the sector without challenging the dominance of state-backed firms. Yet China is setting its own pace. Central bank governor Yi Gang has described the moves as “prudent, cautious, gradualist.”

To contact Bloomberg News staff for this story: Lucille Liu in Beijing at;Jeanette Rodrigues in Mumbai at

To contact the editors responsible for this story: Candice Zachariahs at, Grant Clark, Paul Geitner

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