RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/W/21
1 October 2002
(02-5253)
Committee on Trade in Financial Services Original:  English
COMMUNICATION FROM JAPAN
Transitional Review Mechanism in connection with Paragraph 18
of the Protocol on the Accession of the People’s Republic of China (“China”)
Japan’s Comments on Trade in Financial Services
The attached communication has been received from the delegation of Japan with the request
that it be distributed to Members of the Committee on Trade in Financial Services.
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1. Japan welcomes China’s efforts to implement its commitments under the Protocol on the
Accession into the WTO.  While China has committed to provide relevant information to eachsubsidiary body in advance of the review under the Protocol on the Accession into the WTO, such
information has not been received.  Japan, therefore, submits its comments well in advance of the
scheduled review in the Committee on Trade in Financial Services on 21 October, so that the Chinese
authority will have sufficient time for responding and providing related information.
2. Japan is willing to work closely with China and other Members, so as to ensure the
transparency committed under the Protocol, and it is appreciated if China responds to our comments
in written form with related information, ten days before the CTFS meeting.
A. I
NSURANCE AND INSURANCE RELATED SERVICES
1. Limitation on the form of establishment
3. Foreign life insurers are permitted to enter into Chinese market only through joint ventures,
while non-life insurers will be permitted to establish 100% foreign owned subsidiaries in accordance
with the phased-in schedule. In this respect, Japan should like to ask (a) the reasons for suchdifferentiated treatment between life and non-life insurers, and (b) if Chinese authorities intend to
continue the current restrictions on foreign capital participation in life insurance business. If Chinese
authorities have intention to relax the restriction in the future, Japan should like to ask them to make
publicly available schedules to increase foreign capital participation or permit the establishment of
branches (or 100% foreign owned companies).
2. Geographical restrictions
4. China’s Schedule of Commitments provides that foreign insurers will be permitted to conduct
insurance business in Beijing, Suzhou, Jiangmen, Dong Guan and Tianjin, only two or five years after
the accession. On the other hand, certain foreign insurers are currently permitted to conduct insurance
business in the above five cities. Japan should like to ask Chinese authorities to confirm if these fiveS/FIN/W/21
Page 2
cities (Beijing, Suzhou, Jiangmen, Dong Guan, Tianjin ) are open to other foreign insurers of the WTO
Members.
3. Limitation on the number of licenses
5. China inscribes in its Schedules of Commitments that licenses will be issued with no
economic needs test or quantitative limits on licenses. However, it is the fact that no license has beenissued to foreign life and non-life insurers since China’s accession. Japan has grave concerns about
the current situation and carefully watches how many li censes will be issued to foreign insurers in the
near future.
4. Progress on the amendment of domestic insurance regulations
6. Japan should like to confirm the schedule and contents of amendment of domestic insurance
regulations which are said to take place following this September. For example, Chinese Schedules of
Commitments provides that compulsory cession of all lines of the primary risks for non-life, personalaccident and health insurance business with an appointed Chinese Reinsurance Company shall be
progressively eliminated in the period of four years after accession. Japan should like to ask Chinese
authorities to clarify the status of the amendment of relevant regulations on domestic insurers.
5. Life insurance brokers
7. China’s Schedule of Commitments provides that only foreign non-life insurance brokers will
be permitted to conduct brokerage business in accordance with the phased-in schedule, while China
makes no commitments on life insurance brokers. Japan should like to ask Chinese authorities
whether they intend to allow life insurance brokerage to be conducted by foreign institutions.
6. Contact with Chinese insurance authorities
8. Japan requests that direct contacts of foreign insurers with the Chinese insurance authorities,
which is at present difficult, should be enhanced.
B. B
ANKING
1. Licensing to foreign banks
9. Japanese banks have not been issued licenses since China’s accession. Japan is of the view
that Chinese authorities issue licenses to foreign banks by non-transparent rules and procedures notbased on clear economic criteria. Japan should like to ask Chinese authorities to provide detailed
information on relevant criteria and policies on licensing to foreign banks.
2. Motor vehicle financing by non-bank financial institutions
10. Although there is an explicit reference to liberalization of motor vehicle financing by non-
bank financial institutions in China’ Schedule of Commitments, it is not possible to apply for
establishment of commercial presence since no conc rete regulation has been published in this area.
Japan should like to ask Chinese authorities to provide detailed explanation on this situation.
3. Restrictions on fund-raising and lending in Renminbi by foreign banks (restrictions on
inter-bank fund raising of the local currency by foreign banks)
11. It is dubious whether it is an appropriate prudential rule to impose the proposed restrictions on
inter-bank fund raising by foreign banks, in addition to the other proposed rules to require 8%S/FIN/W/21
Page 3
dotation  capital for banks’ assets and additional capital for each category of banking business. The
proposed regulation would hamper foreign direct investment in China, as Chinese banks are currently
unable to provide adequate financial support to all foreign companies investing in China.  Japan
should like to ask Chinese authorities to provide reasons to introduce the proposed regulations as well
as to comment on the above view.
4. Transparency in application procedures
12. Article 13 of the Regulation on Administration of Foreign Financial Institutions, which
entered into force on 1st Feb, 2002, stipulates that People’s Bank of China shall conduct prior
assessment of applications from foreign financial institutions and decide within six months after
receiving complete applications whether to accept such applications.  However, the same article also
provides that People’s Bank of China may extend prior assessment period not exceeding three months
and inform the applicants of the extension, in sp ecial circumstances where it is unable to complete
prior assessment and to decide whether to accept or deny such applications.  Japan should like to
request People’s Bank of China to give a written notice to applicants (foreign financial institutions) of
the date of its receipt of their applications for prior assessment, as well as of whether to extend the
assessment period and (in the case of extension) the reasons for the extension.
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