China will allow foreign investment in strategic sectors, including securities firms, credit rating agencies, banks and insurance companies, as Bejing looks to open up the country’s economy.
In new guidelines jointly issued by the National Development and Reform Commission and Ministry of Commerce, the government removed 30 items, ranging from motorcycle manufacturing to shale gas, from its restricted list. The guidelines will be effective July 28.
Premier Li Keqiang said last week during the World Economic Forum in Danian that China needs to "eliminate barriers" to foreign investment.
Tiecheng Yang, a Beijing-based partner in the financial regulatory group at Clifford Chance, said: ‘It still needs to be seen how the authorities will implement this restriction lift. In other words, it is still unclear if foreign investors can establish wholly foreign-owned enterprises or acquire all the equities of the enterprises in these industries once the new guidelines come into effect. We need to see if a specific industrial regulator will issue detailed rules in a specific industry.’
Yang said that the caps on foreign investment vary between industries – for example, overseas investors can hold 50% of a life insurer, or 70% of a medical institution.
‘We understand that industries capturing high attention from foreign investors are likely to include the financial and service sectors, whose caps for foreign shareholding are mostly 50%,’ he said.
Under the new rules, accounting and auditing firms, as well as credit investigations and rating services will be open to foreign investment. China has been pushing for better corporate governance at private enterprises, and to open up its corporate bond market.
‘From a portfolio investment standpoint, the new guidelines should attract foreign capital investing in China, which should help stabilising the [renminbi] outflows,’ said Mansfield Mok, senior fund manager at EFG Asset Management.