. /.  
RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/36 
28 October 2004 
 
 (04-4584) 
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  
 
 
 The following communication, dated 25 Octobe r 2004, from the delegation of Japan is being 
circulated to the Members of the Comm ittee on Trade in Financial Services.   
 
_______________ 
 
 
Questions and Comments of Japan on the Implementation by China 
of its Commitments on Trade in Financial Services 
  
1. Japan welcomes that, in the third year af ter accession, implementation by China of its 
commitments on trade in financial services has progressed and entered into a cruising phase. In a transitional period of evolving regulations, the impor tance of regulatory transparency, predictability, 
stability and consistency is paramount; the value of  market access commitments and the efforts to 
implement them could be easily clouded out by a s hortness of such elements either in regulations 
themselves or in their application. The transiti onal review mechanism could be useful for making 
those transitional efforts more efficient and producti ve, and it is a pleasure for Japan to contribute to 
this process. 
2. In this context, China is further invited to  take the necessary steps to ensure regular and 
effective application of public comments proce dures, well-in-advance publication of laws and 
regulations, avoidance of abrupt regulatory change, clear demarcation of departmental 
responsibilities, improvement in inter-departmen tal and central-provincial coordination and 
consistency, etc. 
3. In accordance with Paragraph 18 of the Protoc ol on the Accession of the People’s Republic of 
China, which states that “China shall provide releva nt information to each subsidiary body in advance 
of the review” and in the spirit of cooperation to render the TRM process most efficient and effective, 
Japan requests China to provide in advance of the Regular Meeting of the Committee on Trade in 
Financial Services responses and relevant inform ation to the following questions and comments. 
I. INSURANCE 
4. Japan welcomes the specific meas ures China has taken since the last TRM to implement its 
WTO commitments with respect to the insurance sector.  Japan is pleased to note that geographic and 
operational restrictions are being lifted in acco rdance with China’s commitments.  While not 
challenging China’s right to introduce prudential me asures (as defined in paragraph 2 (a) of Annex on 
Financial Services), Japan remains interested in ma rket access for foreign inv ested insurers through 
China’s effective implementation of its WTO commitments.  To this end: S/FIN/W/36 
Page 2  
 
 
(a) Please confirm that transparency in licen sing requirements and procedures ensures 
the effective implementation of the WTO commitments; and  
(b) Please explain the prudential reasoning be hind minimum capital requirements for 
insurance companies, which remain very high  compared with international standards. 
 
II. BANKING 
5. Japan welcomes the specific meas ures China has taken since the last TRM to implement its 
WTO commitments with respect to the banking sector .  Japan is pleased to note that geographic and 
operational restrictions are being lifted in accordance with China’s commitments.  Also, foreign banks 
were enabled to submit, within a year of an appr oval for a branch, an application to open another 
branch.  Likewise, foreign banks were enabled to r esubmit the application within a year of a rejection 
to open a branch.  While not challenging China’s right to introduce prudential measures (as defined in paragraph 2 (a) of Annex on Fina ncial Services), Japan remains in terested in market access for 
foreign invested banks through China’s effective im plementation of its WTO commitments.  To this 
end: 
(a) Please confirm that transparency in licen sing requirements and procedures ensures 
the effective implementation of the WTO commitments;  
(b) Please inform if China is considering to introduce flexibility in the requirement for a 
newly established branch to engage  in local currency business; and  
(c) Please inform if China plans to introdu ce flexibility in applying a long-term 
borrowing quota to foreign invested banks, in light of affording equal competitive 
opportunities (as defined in Article XVII.3 of the GATS). 
 
__________