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Limits on foreign ownership of Chinese financial firms getting loosened

How much market access U.S. companies have to China varies based on industry. China has special market access restrictions for some industries. Among the restrictions China sometimes uses are limits on what percentage of ownership foreign firms can have in Chinese businesses.

Among the industries that currently have such limits in China are the banking, securities and insurance industries. Recently, the Chinese government announced plans to relax or lift the limits on foreign ownership for these three industries.

Under the announced plans, foreign firms would:

  • At some point in the future, no longer be limited to 25 percent ownership in banks in China.
  • In three years, be allowed to hold up to a 51 percent ownership share in insurance companies in China. In five years, the allowed ownership percentage would rise all the way up to 100 percent.
  • Be able to have up to a 51 percent ownership share of securities firms, futures companies and fund managers in China. In three years, the allowed share would be a full 100 percent.

At this point, it is unclear how big of an immediate impact such changes will have on how big of a presence U.S. financial firms have in China. One reason for this is that there are other factors that could make some such firms hesitant to rush into these markets in China. These include China’s new cybersecuirty laws and concerns regarding the equipment requirements of operating in these markets.

As this illustrates, there are a range of concerns a U.S. firm may have when considering establishing or growing a presence in China. Such companies can go to U.S.-China business attorneys for guidance on these concerns and how they can address the concerns as they pursue their goals regarding doing business in China.

There are a variety of things it will be interesting to watch as the above-mentioned changes to the ownership limits are made. These include:

  • How financial firms here in the U.S. react to the changes.
  • What impacts the changes have within Chinese financial industries and in the opportunities U.S. firms have in these industries.
  • What ramifications the changes have for the overall business and trade relationships between the U.S. and China.

Source: The New York Times, “China Eases Limits on Foreign Stakes in Financial Firms,” Keith Bradsher, Nov. 10, 2017

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