China only permits certain types of foreign businesses to operate in their country. More than 300 industries are allowed, but there are still several that the law does not sanction.
Next year, the Chinese government will bring many changes as it revises part of this law.
Companies in the financial sector were heavily restricted in the past
In the last blog post, we discussed how China regulates the businesses it allows into its market. The government uses the Catalogue of Industries for Guiding Foreign Investment, which directly states what businesses are encouraged, restricted or prohibited. Almost all businesses in the financial industry are restricted by the catalogue, including:
- Banks
- Insurance companies
- Securities companies
- Futures companies
However, by December 1, 2020, China will lift those restrictions.
China will open up part of its financial sector in 2020
According to Reuters, China will open a portion of its financial sector to foreign investors next year. They will begin accepting businesses such as:
- Futures companies
- Brokerage firms
- Mutual fund agencies
Citigroup is one of the first businesses planning to move forward and establish a securities business once China lifts the restrictions. The company currently has a joint-venture plan in China, but it is arranging to leave that deal and establish a wholly-owned securities operation.
Why is this change important?
China has the world’s second-largest economy. The fact that they are lifting restrictions on the financial sector will provide many new opportunities for U.S. business owners. And these opportunities will likely extend benefits to all U.S. businesses in China, not only those offering financial products.