. /. RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/41 
15 November 2004 
 (04-4836) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM CHINESE TAIPEI 
 
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 11 November 2004, from the delegation of Chinese Taipei is being circulated to the Members of  the Committee on Trade in Financial Services.  
 
 
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1. We welcome China’s Implementing Rules for the Administrative Regulations on Foreign-
Invested Financial Institutions , issued on 26 July 2004.  We are pleased to note that some of the 
amendments made to the Rules  by China’s competent authorities ar e in response to questions posed 
by Members at the last TRM sessions. Changes incl ude the removal of the restriction of branch 
opening to one per year, the lowering of capital requi rements, and improved clarity of the application 
procedure.  Some issues remain, however, on which some further clarification would be appreciated. 
A. B
ANKING SERVICES  
2. Article 17 of the Implementing Rules stipulates a minimum of RMB 100 million of working 
capital for each direct branch of a foreign bank, or of a Chinese-foreign joint bank in China.  
However, Article 19 of the Law of Commercial Banks in China , as amended in December 2003, 
carries no such stipulations. Could China please e xplain the rationale behind these seemingly different 
treatments, particularly as this limitati on does not seem to apply to Chinese banks?  
3. In Articles 31 to 35 of China’s new Implementing Rules , the minimum capital requirements 
for each foreign branch are still comparativ ely high, ranging from RMB 100 to 500 million, 
depending on the scope of  the business. Having raised the issue last year, we would appreciate it if 
China’s authorities continue to review the necessity  of making this requirement so high that it will 
surely restrict market access for foreign banks. 
4. In China’s Administrative Regulations on Fo reign-Invested Financial Institution s, effective 1 
February 2002, Article 17 requires pa rent banks applying to open a branch  in China to have more than 
US$ 20 billion in assets at the end of the year prior to application.  While we acknowledge that this 
complies with its commitments, we would welcome China taking the initiative in lowering the amount 
of assets required, or at least adopting a more flexib le approach, such as using either the total assets of 
the financial holding company or the assets of the whole financial conglomerate as the set of 
indicators, instead of considering just the assets of the individual bank. S/FIN/W/41 
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B. I
NSURANCE SERVICES  
5. Article 5 of the Administrative Regulations on Forei gn-Invested Insurance Companies 
requires a foreign insurance company wishing to est ablish an insurance institution in China to have 
total assets of no less than US$5 billion at the end of the year prior to application.  
6. Because life and non-life insurance businesses are di fferent in nature, their assets vary widely 
in terms of scale.  A life insurance company usua lly writes long-term policies, which require large 
technical reserves. This will in turn affect the size of its total assets. On the other hand, with most of 
its insurance policies being short-term, a non-life in surance company’s techni cal reserves are lower, 
resulting in smaller assets. 
7. Given these fundamental differences, would it not  be more reasonable for China to introduce 
different levels of asset requirements for the two types of business?  Moreover, for life and non-life 
insurance businesses alike, the le vel of assets is not necessarily the best criteria for judging a 
company’s financial soundness. Would China therefor e consider using a more suitable yardstick such 
as net worth? 
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