2022-12-03-安永_中国_-White_paper_on_China_s_further_opening-up_of_the_financial_market_–_Five-year_anniversary_2017-2022_96页_12mb

Summary of China's Further Opening-Up of the Financial Market - Five-Year Anniversary (2017-2022)

Core Content

China's financial market has undergone significant reforms and opening-up over the past five years, starting from the 19th National Congress in 2017 and continuing through the 20th National Congress in 2022. These reforms are aligned with the broader goal of building a new development pattern that emphasizes the interplay between domestic and international economic flows. The opening-up has been driven by a series of policy measures aimed at enhancing market accessibility, fostering international cooperation, and improving regulatory frameworks.

Main Points and Key Information

Policy Evolution and Opening-Up Progress

• Strategic Emphasis on Opening-Up: The term "opening-up" has been repeatedly emphasized in the 20th CPC National Congress report, highlighting its importance in China's financial development strategy.
• WTO Commitments: China's financial opening-up is also a fulfillment of its WTO entry commitments, and a strategic choice to support structural reforms in the financial system.
• Five-Year Milestones: A series of key policies have been introduced since 2017, including the reduction of foreign ownership restrictions, expansion of business scope for foreign financial institutions, and the establishment of new financial connectivity mechanisms.

Capital Market Integration

• Internationalization of A-Shares: A-shares have become increasingly international, being included in major global indices such as MSCI, FTSE Russell, and S&P Dow Jones Indices since 2017.
• Capital Market Developments: The capital market has seen significant integration with the international financial market, with foreign investors' holdings of domestic stocks and bonds increasing substantially.
• Key Projects:
  • Shanghai-London Stock Connect: Launched in 2019, it was upgraded to China-Europe Stock Connect in 2021.
  • Mainland-Hong Kong Stock Connect: ETFs were included in the schemes in 2022, expanding investment options.
  • Bond Connect: Initially launched in 2017, it has become a major channel for foreign investors to access China's bond market, with a significant increase in participants and market value.

Banking and Insurance Sector Developments

• Banking Sector: The CBIRC removed foreign ownership restrictions on Chinese banks and financial asset management companies in 2018, leading to a 17% increase in total assets of foreign banks in China by 2021.
• Insurance Sector: The insurance market has become more accessible, with foreign ownership restrictions removed and market share increasing from 4.7% in 2017 to 7.8% in 2021. Some cities like Beijing and Shanghai saw a market share of 20%.
• Institutional Introduction: Foreign banks, insurance companies, and asset managers have been actively introduced into the Chinese market, with over 120 foreign banks approved by the CBIRC from 2018 to 2021.

Asset Management Sector Growth

• New Era of Asset Management: As China's per capita national income surpassed USD10,000, the asset management sector entered a new era, showing structural differentiation and rapid growth.
• AUM Growth: The total AUM of asset management institutions rose from RMB112.56 trillion in 2017 to RMB131.16 trillion in 2021, an increase of nearly 17%.
• Wealth Management JVs and Foreign-Owned Funds: There are now 4 wealth management joint ventures with more than 50% foreign equity, and 3 wholly foreign-owned public funds.

Cross-Border Financial Connectivity

• Qualified Foreign Institutional Investors (QFIIs): The number of QFIIs increased by 65% from 439 in 2017 to 723 in 2022. Their stock holdings surged over four-fold, and the investment quota restrictions were abolished in 2019.
• Cross-Boundary Wealth Management Connect (WMC): Launched in 2021, WMC has seen a rapid increase in participants, with over 32,500 individual investors in the GBA participating by July 2022.
• ETFs and Stock Connect Schemes: ETFs were officially included in the Mainland-Hong Kong Stock Connect schemes in 2022, allowing for more diversified investment opportunities.

Regulatory Model Reforms

• Shift to Ex-Post Supervision: China has moved from an ex-ante approval model to ongoing and ex-post supervision, enhancing the flexibility of the market and improving the business environment.
• Financial Risk Management: Preventing financial risks has become a central focus of regulatory efforts, with the introduction of macro-prudential policies and the establishment of a financial stability guarantee fund in 2020.
• Negative List Approach: This approach has replaced the positive list method, broadening the scope of foreign investment and aligning with international practices.

Global Recognition

• GFCI Rankings: The Global Financial Centers Index (GFCI) shows that China has made significant progress in financial development. By 2022, four Chinese cities ranked in the top 10, including Hong Kong (4th), Shanghai (6th), Beijing (8th), and Shenzhen (9th).
• Economic Impact: The opening-up has brought advanced international experience in management and risk control to the Chinese financial market, stimulating domestic institutions to improve their capabilities and support the real economy.

Outlook

China's financial market is expected to continue its high-standard opening-up, driven by strategic goals and international cooperation. The establishment of new financial centers, such as the Shanghai Asset Management Association, reflects the ongoing commitment to building a global financial hub. EY's white paper serves as a comprehensive review of these developments, aiming to provide insights to both domestic and international institutions to better understand and invest in China's financial market.