. /. RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/39 
8 November 2004 
 
 (04-4724) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM THE EUROPEAN COMMUNITIES 
 
Transitional Review Mechanism in connection with Paragraph 18 of 
 
the Protocol on the Accession of the People's Republic of China  
 
 
 The following communication, dated 4 November 2004, from the delegation of the European Communities is being circulated to the Members of  the Committee on Trade in Financial Services.  
 
 
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1. The EC is transmitting comments and questions in advance of the meeting of the Committee 
on Trade in Financial Services of 23 November, in order for the Chinese authorities to have sufficient 
time to provide complete replies. 
2. Once the information to be provided by Ch ina in accordance with paragraph 8 and 
paragraph IV.3 (a) of Annex 1A of its Accession Prot ocol has been received, the EC might come back 
with additional questions. 
3. The EC welcomes the entry into force in June 2004 of the Regulations on Administration of 
Foreign-Funded Insurance Companies, in particular  in relation to minimum capital requirements. 
4. The EC also welcomes the removal of the one branch opening per year limit for foreign 
banks, as well as the lowering of capital requirements for direct branches of foreign banks. 
5. Minimum working capital requirements for direct  branches of foreign banks remain however 
extremely high, ranging from RMB 100 million to  RMB 500 million per branch depending on the 
business scope. These requirements are much higher than minimum capital requirements in most other countries and effectively limit market access for foreign banks. At last year’s TRM, China indicated it would consider further reducing br anch capital requirements in line with further 
development of its regulatory framework. 
 Considering the still extremely high level of capital requirements, could China please 
indicate if and when it intends to furt her reduce minimum capital requirements for 
branches ? 
6. Moreover, minimum working capital is required for each direct branch in China from the 
same bank, irrespective of the number of branches, and capital adequacy ratios have to be met for 
each individual branch, in isolation from the ot her branches. This seems excessive as Chinese 
authorities also require that the head office abroad of the foreign bank guarantees all liabilities of its 
branches in China. 
 Could China please indicate whether it intends to apply these requirements to the 
overall commercial presence of a bank in Chin a, and not to each of its branches? S/FIN/W/39 
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 7. China requires that 30% of the working capital of  foreign branches at any time be deposited at 
a local bank on a list defined by Chinese authorities or , in case of Renminbi, alternatively be used to 
buy Government bonds. 
 Could China please explain why it does not a llow those funds to be lodged with foreign 
banks established in China, in line with it s national treatment commitment? Moreover, 
could China please explain why it requires such a large proportion of working capital to 
be deposited with another bank? 
8. According to CBRC Order No. 6 2003, the percenta ge that an individual foreign financial 
institution can invest in the shares of a China-funde d financial institution shall not exceed 20 percent. 
In addition, the percentage of the sum of several fo reign financial institutions investing in shares of a 
China-funded financial institution is in  practice limited to 25 percent. 
 As part of its WTO commitments, China has committed to removing foreign ownership 
restrictions in the banking sector. What a re China’s plans for lifting these foreign 
ownership limitations? 
9. In the insurance sector, we understand that  China only authorises actuaries ("appointed 
actuaries") from a small number of countries, as only professional degrees from those countries are 
recognised. This leads to an unjustified discrimination of actuaries from other countries. 
 Could China please indicate whether it inte nds to remove this discriminatory treatment 
of actuaries? 
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