China defends foreign bank ownership limit at WTO

November 2, 2009

GENEVA, Nov 2 (Reuters) – China has no plans to increase the limits on foreign ownership of Chinese banks, Chinese officials told trading partners at the World Trade Organisation on Monday.The United States, Japan and the European Union questioned China on the limits and on other banking, insurance and securities issues at the WTO’s committee on trade in financial services, according to participants in the meeting.

China currently limits the share of a single foreign investor in a Chinese bank to 20 percent and treats banks as foreign if the total foreign share exceeds 25 percent.

The three WTO members questioned this policy as China did not agree limits on foreign ownership when it joined the WTO in 2001.

Under the terms of China’s accession, its compliance is examined every year for 8 years, and again in 2011, the 10th year. This is the 8th year.

Chinese officials told the committee the 20 percent limit was reasonable given China’s state of development and the recent turmoil in the international financial system.

It added it needed to take particular prudential measures for foreign-owned banks to protect Chinese depositors and maintain financial stability.

Replying to a question from Japan on whether foreign banks would be allowed to conduct yuan-denominated retail business, China said it was unable to monitor overseas parent institutions with branches in China.

Foreign banks that want to conduct yuan retail business in China must do so through China-registered subsidiaries, it said.

China also said its bank card market was open to foreign as well as domestic banks, rejecting U.S., EU and Japanese criticism that the electronic payments system was closed.

(Reporting by Jonathan Lynn, editing by Tim Pearce) ((; +41 22 733 3831; Reuters Messaging: ))

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