China will increase foreign ownership limits in financial firms as the country tries to become a multi-trillion dollar financial services market. Chinese President Xi Jinping has been pushing for economic reforms by opening up capital markets, internationalizing the country’s currency, and pursuing incredible inbound and outbound investments. Currently, the limit on foreign ownership in joint venture firms have been increased from 49% to 51%. This plan follows Beijing’s pressure from Western governments and business lobbies to get rid of investment barriers rand regulations that prevent overseas firms’ operations in the markets.
The country plans to allow global blanks to take a stake of up to 51% in onshore securities ventures for the first time ever and tie up with local non financial companies. Over the past few years, China has been slow to give foreign companies more access to their financial sector but claims to increase the pace as foreign investment into Asia’s economy slows down. China implement strict controls to contain capital outflows while also opening up new channels for foreign money to be brought into domestic markets.
In the past decade, Western investment banks that operated through joint ventures with local partners in China have been struggling to expand as they strive to win business against much larger local competitors. Firms such as Morgan Stanley has increased their stake in Morgan Stanley Huaxin Securities from 33% to 49%. China is planning to drop foreign ownership restrictions on local banks and asset management companies. However, the full ownership of these local firms involved in securities, futures, and funds markets will not be allowed until after three years. Full overseas ownership of insurance firms on the other hand will be permitted only after five years.