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ICI Alerts Trade Representatives to Barriers to Entry in Chinese Asset Management Industry
Washington, DC, August 15, 2003 - The Institute has urged U.S. Trade Representatives to address several specific issues during the second annual Transitional Review Mechanism (TRM) for China, which includes a comprehensive annual review of China’s efforts to comply with its World Trade Organization commitments.
In December 2001, China acceded to the World Trade Organization and, as part of its accession agreement, allowed foreign firms to own up to 33 percent of a Chinese asset management firm as of December 11, 2001, and up to 49 percent of an asset manager by December 11, 2004. Moreover, China agreed that, as domestic managers are permitted to provide broader array of services, it would allow foreign asset managers to provide the same services as domestic managers.
Throughout the WTO accession negotiations, the Institute expressed support for efforts to lift the barriers that prevent U.S. business from marketing their services and products in China, identified several specific barriers to market access that exist in China, and urged U.S. trade negotiators to seek elimination of those barriers.
In January 2002, the Institute commented on rules proposed by the China Securities Regulatory Commission (CSRC) has that would permit foreign institutions, including U.S. firms, to enter into joint ventures with Chinese companies to provide asset management services in China.
In its most recent letter, the Institute recommends that China go beyond its 49 percent equity ownership commitment and permit a foreign asset management firm to choose its form and equity participation levels to best enable it to provide asset management services and compete on the same basis as domestic firms.
The Institute also states that, for China to implement the commitments in place in the accession agreement, China must make progress in eliminating barriers that prevent U.S. and other foreign firms from obtaining effective market access to the Chinese market. Specifically, the Institute requests that China provide greater transparency in the eligibility criteria for foreign institutions seeking to participate in the Chinese domestic asset management market and create a uniform minimum time period for comment in promulgating regulatory requirements. The Institute also states that the current capital requirement imposed on foreign firms entering into a joint venture to provide asset management services is excessive, is not necessary for protection of investors, and operates as a barrier to entry. Finally, the Institute states that certain requirements of the new Qualified Foreign Institutional Investors (QFII) rules—the percentage of an issuer’s securities that may be held by any one QFII and all QFIIs in the aggregate, high minimum account provisions, and repatriation restrictions—operate as barriers to entry for QFIIs and will serve as a disincentive to investment in China.
- Changes Made to Chinese Joint Venture Proposal Reflect Institute Comments, June 2002
- Institute Comments on Proposal to Allow U.S., Chinese Joint Ventures, January 2002
- U.S. and China Sign Bilateral Trade Agreement, December 1999
- China Approves New Mutual Fund Rules, February 1998
- Institute Files Comments with USTR on Trade Issues, April 1997