China to Scrap Foreign Ownership Rules for Fintech Companies

Merely a day after the start of Donald Trump’s visit to China, the central government of the country is taking steps to relax some rules governing financial services. The vice-minister of finance, Zhu Guangyao, is on the wires this EU morning. He states that foreign companies will be allowed to control up to 51 percent of local firms providing financial services.

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The move could be a direct response to the US president’s suggestion that China relaxes market access for American companies. Several years of complaints from foreign companies bring today’s change, that sets in motion a revamp of the business environment for Fintech ventures in China. Up until now, ooffshore firms were only allowed to hold up to 49 percent of a local joint venture.

The details are still lacking, but the Chinese government is preparing to relax or eliminate ownership limits in several sectors. Those include commercial banking, securities and futures businesses, asset management, and insurance as confirmed by Guanyao.

Online Trading Industry Implications

The move by the Chinese government can be a leap forward for online trading and fintech in general. As foreign companies gain a more fair and open access to the local market, the growth opportunities (and competition) in the region is set to increase.

Historically the Chinese authorities have mandated foreign companies to share their know-how with local partners. While these requirements will remain in place, the most important limitation - that of a minority stake ownership - could make even more companies set their eyes on China.

There Might be Strings Attached

The opening of the local financial services industry to foreign companies is not likely to be free. While the Chinese government has been relatively lax when it comes to the regulatory rules governing the sector, the move could spell the end of this approach.

With a financial regulator in Hong Kong that has a solid reputation, Chinese authorities have a choice how to address oversight of what could be an unprecedented boom in fintech. As the market becomes more accessible to foreign companies, the Chinese authorities will still be applying capital controls and the bureaucratic burden on local operators is not likely to be removed any time soon.