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Phase-one deal accelerates opening-up of financial service sector

By Li Xiang | China Daily | Updated: 2020-01-17 07:56
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China and the United States pledged in their phase-one trade agreement on Wednesday to accelerate two-way opening of the financial service sector. [Photo/IC]

China and the United States pledged in their phase-one trade agreement on Wednesday to accelerate two-way opening of the financial service sector and expand market access for each other's companies-a move that is mutually beneficial and in line with China's objectives, analysts said on Thursday.

The countries agreed to provide fair, effective and nondiscriminatory market access for each other's financial companies in sectors such as banking, securities, insurance, futures, asset management, electronic payments and credit rating.

They also reached consensus on macroeconomic policies and exchange rates, recognizing that strong fundamentals, sound policies and a resilient international monetary system are essential to exchange rate stability. Stability, in turn, leads to strong and sustainable growth and investment.

The People's Bank of China, the central bank, said in a statement that the agreement reflected the progress China has made to actively push an orderly opening-up of the financial sector, which helps the competitiveness and resilience of the Chinese financial system and will boost China-US cooperation.

Dong Yan, a research fellow at the Institute of World Economics and Politics, noted that financial opening is an established national policy. The country has adopted a fresh round of liberalizing measures that largely reflect the content of the agreement on financial services.

"The opening of the financial service sector will be mutually beneficial. The agreement included commitments from both China and the US. It will also enable Chinese financial institutions to go abroad and carry out business in the US market," Dong said.

Under the agreement, China will eliminate foreign equity limits in securities, fund management and futures, as well as in the life insurance, pension and health insurance sectors, no later than April 1. The country will also grant US companies greater market access in the areas of credit rating services, electronic payments and management of debt distress.

Meanwhile, the US affirmed in the agreement that it will expeditiously consider pending requests by Chinese financial institutions, including CITIC Group, China International Capital Corp and China Reinsurance Group.

Dong said that further financial opening will not likely have a negative effect on China's financial security, as it will focus mainly on business cooperation. Chinese regulators will continue to improve their capabilities and make them compatible with the level of opening.

Li Chao, chief researcher of macroeconomy at Huatai Securities, said one highlight of the China-US agreement is the opening-up of the electronic payment sector. It signals that US companies such as Visa and MasterCard will take a step forward in China's vast payment market, Li said in a research note.

In the agreement, the US also promised to give nondiscriminatory treatment to Chinese electronic payment service suppliers, such as UnionPay.

The phase one trade agreement and the bilateral commitment to further liberalize the financial industry have boosted corporate confidence.

"We are encouraged that the United States and China are making progress in addressing the trade concerns that exist between the two countries," American Express said in a written note.

The US company is waiting for the regulatory approval for its Chinese joint venture to start the clearing and settlement business in China.

Jiang Xueqing and Chen Jia contributed to this story.

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