RESTRICTED   WORLD TRADE  
ORGANIZATION  S/FIN/M/47 
26 November 2004 
 
 (04-5157) 
Committee on Trade in Financial Services  
  
 
REPORT OF THE MEETING HELD ON 23 NOVEMBER 2004 
 
Note by the Secretariat
1 
 
1. The Committee on Trade in Financial Services held a meeting on 23 November 2004, under 
the Chairmanship of Ms. Miyon Lee (Republic of Korea).  The proposed agenda is contained in 
airgram WTO/AIR/2447.  
2. The representative of Antigua and Barbuda  announced his intention to make a statement 
under Other Business on the following topic:  Pluril ateral Financial Standards and their Regulation – 
The experience of Small Developing Members of the WTO.  The Chairperson  proposed that the 
agenda be adopted with the addition of that item under Other Business.   
3. It was so agreed . 
A. ADOPTION OF THE ANNUAL REPORT TO THE COUNCIL FOR TRADE IN SERVICES  
4. Pursuant to the annual reporting requirements to the Council for Trade in Services, the 
Chairperson  drew Members' attention to document S/ FIN/W/38, containing a draft report of the 
Committee's activities in 2004.  
5. With regard to paragraph 2 of the draft report, the representative of the United States  
suggested the deletion of the expression "reported periodically" since some of those three Members did report periodically while others did not.  She al so suggested that the following sentence be added 
to the paragraph: "Several delegations expressed  their concern that these countries had not yet 
accepted the Fifth Protocol." Finally, she proposed  deleting the second sentence of paragraph 3 or, 
alternatively, inserting a revised text as follows: "In the meeting held on 25 June 2004, the Chair 
asked Members to discuss ideas for fu ture work on the basis of an annotated agenda JOB(04)/72.". 
6. The representative of Brazil
 had a preference for retaining the reference to periodic reporting, 
because that reflected the actual situation as fa r as his country was concerned.  He also sought 
clarification from the Secretariat as to whether the report should make reference to acceptance or 
ratification of the Fifth Protocol.   
7. A representative of the Secretariat  said that the technical term used in that context was 
"acceptance", which was a generic term, because legal requirements varied from country to country.   
8. The representative of the United States  said she could not accept the reference to periodic 
reporting, although she would not oppose other formulati on that could take care of the fact that Brazil 
did inform Members periodically.  She suggested, as an alternative, to ma ke reference to "some 
Members provided information on the situati on of their domestic acceptance procedures".   
                                                      
1  This document has been prepared  under the Secretariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/FIN/M/47 
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 9. The representative of Brazil
 said that he could accept a reference to "some Members provided 
periodically information on the situation of  their domestic acceptance procedures." 
10. The representative of Philippines  said, with regard to the suggestion by the United States for 
paragraph 3, that it would be more in line with current practice in the WTO to make reference to 
"some delegations" instead of "several delegations".  
11. The representative of the United States  said that she could accept the amendments put 
forward by Brazil and Philippines.  
12. The Chairperson  read out the amendments to be introdu ced to the annual report.  Paragraph 2 
would read as follows: "Three Members have not yet accepted the Protocol: Brazil, Jamaica and the Philippines.  At the Committee's invitation, some Members provided periodically information on the 
situation of their domestic acceptance procedures.  Some delegations expressed their concern that 
these countries had not yet accepted the Fifth Protoc ol".  The second sentence of paragraph 3 would 
state as follows: "In the meeting held on 25 June  2004, the Chairperson asked Members to discuss 
ideas for future work on the basis of an annot ated agenda contained in JOB(04)/72".   
13. The Committee adopted
 the annual report with those changes.   
B. TRANSITIONAL  REVIEW  UNDER  SECTION  18 OF THE  PROTOCOL  ON THE  
ACCESSION  OF THE  PEOPLE'S  REPUBLIC  OF CHINA 
14. The Chairperson  recalled that the Committee was manda ted to conduct this review of the 
implementation by China of its commitments in the WTO pursuant to section 18 of the Protocol on 
the Accession of the People's Republic of China.  For this year's review, written communications had 
been received from the following Members: Japan (S/FIN/W/36); Canada (S/FIN/W/37); the 
European Communities (S/FIN/W/39);  the Un ited States (S/FIN/W/40);  Chinese Taipei 
(S/FIN/W/41);  and Australia (S/FIN/W/42).   
15. The representative of the People's Republic of China  said that in the third year after China's 
accession to the WTO, China had implemented its WTO commitments to a greater extent.  In the past 
year, Chinese financial authorities had developed and published a series of important regulations, 
which served to implement the undertaking to open the financial indus try and enhance the 
transparency and efficiency of the financial regulatory work. 
16. As part of the process of speeding up legisl ation, streamlining review and approval 
procedures and enhancing the transparency of policies, the Law of the People's Republic of China on Banking Regulation and Supervision had been forma lly put into effect on 1 February 2004.  The 
China Banking Regulatory Commi ssion (CBRC) took advantage from that occasion to clear up 
rules and regulations for banking supervision, and lay down and amend specific implementing and 
supplementary rules, including bringing into effect  the Regulation Governin g Capital Sufficiency of 
Commercial Banks on 1 March 2004; the Rules on Consolidated Supervision of Foreign Banks on 1 
April 2004; and the Methods for Administration of Related Transactions Between Commercial 
Banks and Insiders and Shareholders on 1 May 2004. 
17. In response to the opening-up of the banking sector, the CBRC had amended and promulgated 
the Rules for Implementing the Regulation Governing Foreign-funded Financial Institutions in China, 
which took effect on 1 September 2004.  The CBRC also modified requirements and procedures for 
the access of foreign-funded banks to the market, by inter alia  lowering the requirement on the 
amount of operating capital, and reducing operating cap ital grades.  According to  those rules, foreign 
banks were now required to simply file for the r ecord when they intended to offer most services and 
products.   S/FIN/M/47 
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 18. In the case of banking, she said that in D ecember 2004 China would open RMB business to 
foreign-funded banks in Beijing, Kunming and Xiamen, bringing the total number of such cities to sixteen.  By the end of 2006, all territorial restrictions would be cancelled, and individual RMB business for Chinese residences would be liberalized.  At that time, foreign-funded banks would have 
the same RMB business scope as domestic banks.  By the end of October 2004, foreign banks had 
established 204 operational entities in China, incl uding 163 branches, 14 foreign-funded corporate 
bodies, and 223 representative offices of foreign ba nks.  In addition, thus far 105 foreign-funded 
banks had been approved to ope rate RMB business, including 61 banks approved to operate RMB 
business for non-foreign invested enterprises; 13 fore ign banks were now perm itted to provide online 
banking services in China; 23 foreign-funded banks we re permitted to carry out derivative products 
transactions in China; and five foreign bank branch es were permitted to offer custodian services for 
securities investment by qualified foreign institutional  investors (QFII) in China.  Business of foreign-
funded banks was also developing rapidly.  As of  end September 2004, total assets of foreign-funded 
banks in China reached US$66.77 billion, 45.28 per cent higher than the same period of last year; 
among these, assets in RMB reached 91.14 billion yuan,  38.87 per cent higher than same period of 
last year. 
19. In the case of non-bank financial ins titutions, Chinese authorities had approved the 
establishment of four foreign-funded auto financing firms, namely, GMAC-SAIC Automotive Finance Company Ltd., Toyota Motor Financial (C hina) Corporation, Volkswagen Finance (China) 
Co. Ltd., and Ford Automotive Financing Comp any.  GMAC-SAIC Automotive Finance Company 
had already started its operation.  She noted that currently no domestic non-bank financial institutions 
had been approved to provide consumer auto fina ncing services in China, which meant that foreign-
invested companies had 100 per cent market share in this area.  In her view, this indicated China's 
strong will to open the auto finance market and fu lfill its WTO commitments. Furthermore, Chinese 
financial authorities said more foreign-funded au to financing companies would be approved to 
operate in China in the future, as long as they satisfied relevant conditions. 
20. In the case of insurance, by the end of this year, China would phase out all territorial 
restrictions to foreign-funded insurers, allowing fore ign-funded insurers to set  up institutions in any 
city of China.  Meanwhile, foreign life insure rs would be permitted to offer health, group and 
pension/annuity insurance services to Chinese and fo reign citizens.  At that time, foreign-funded 
insurers might carry out all kinds of life and non-life insurance business in China 
21. She said that China had made unparalleled effort s in opening up the insurance sector this 
year.  Almost in every month since the beginning of  the year there had been new branches of foreign-
funded life insurers setting up in China.  Just in Sept ember, some foreign-funded insurers declared to 
set up branches in several cities of China.  At th e beginning of September, ING-CAP was permitted to 
prepare a branch in Beijing; on 15 September, MANULIFE-SINOCHEM was permitted to prepare its 
branch in Ningbo; on 16 September, AVIVA-COF CO set up branches in Beijing and Chengdu; on 
28 September, the Suzhou branch of CITIC-PR UDENTIAL was opened, while its Shanghai branch 
would open before December. 
22. The Implementing Rules for Regulations on Ad ministration of Foreign-funded Insurance 
Companies took effect in June 2004, implying that institutions and business of foreign-funded 
property insurance companies would develop faster in  China.  The Rules allowed branches of foreign-
funded property insurance companies to be change d into wholly foreign-owned property insurance 
companies.  Thus far, several foreign property insurance companies had filed the petition for such 
change with China Insurance Regulatory Commissi on (CIRC).  According to the CIRC, 39 foreign 
insurers had set up 70 insurance operational entities in China, including 22 life insurers, 14 property 
insurers and three re-insurance companies. S/FIN/M/47 
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 23. At the same time, the turnover of foreign -funded insurers was growing dramatically. 
According to the CIRC, the growth rate of forei gn-funded insurers was 100-200 per cent higher than 
that of domestic insurers.  Compared to the same  period of 2003, during the first half of 2004 the 
insurance premium of property insurance companie s and life insurers increased 47.1 and 51.2 per 
cent, respectively.  In the same period, the insuran ce revenue of all property and life insurers in China 
just increased 23 per cent and 6.5 per cent, respectively. 
24. She further said that China was implementing its WTO commitments on securities services in 
a serious manner.  On 16 September 2004, Ch ina Securities Regulatory Commission (CSRC) 
published the Methods for Administration of Secu rities Investment Fund Ma nagement Companies, 
which entered into force on 1 October 2004, and re pealed the Rules for Es tablishment of Foreign 
Capital Involved Fund Management Company. 
25. The Chinese Government encourag ed the establishment of join t venture securities companies 
and fund management companies involving capital of qualified foreign securities institutions.  By end 
October 2004, the CSRC had approved three fore ign capital-involved securities companies and 14 
foreign capital-involved fund management compani es to be set up in China, including 11 already 
opened. 
26. While substantially implementing its WTO comm itments, the financial authorities of China 
had adopted a series of voluntary liberalization measures. 
27. The CBRC had decreased the highest operating capital requirement from 600 million yuan to 
500 million Yuan, and the fifth  level requirement from 400 million yuan to 300 million yuan.   The 
CBRC had also reduced the six levels of operating capital requirement for solely foreign owned and 
joint venture bank branches in China to three leve ls, decreasing the three levels to 100 million, 200 
million and 300 million yuan, respectively.  And th e CBRC had further streamlined the market access 
procedures. 
28. The Tentative Methods for Administration of Derivative Product Transactions of Financial 
Institutions, put into force on 1 March 2004, permitt ed foreign-funded banks to carry out derivative 
product transactions.  The Tentative Methods fo r Overseas Application of Insurance Foreign 
Exchange Capital, jointly published by the CIRC and the People's Bank of China on 9 August 2004, 
allowed foreign-funded banks to engage in cust odian services for overseas application of foreign 
exchange capital of insurance companies. 
29. In the securities sector, although China only unde rtook to open securities services but not the 
capital market in the Protocol (including allowing foreign investment to go into A-share market) in 
the Protocol, Chinese securities regulatory depart ments had taken some voluntary liberalization 
measures, such as enforcing the QFII program.  By the end of October 2004, 27 foreign institutions 
had obtained QFII qualification, with investment li mit US$3 billion.  And other 11 foreign institutions 
(including four foreign-funded ba nks) had been approved to carry out custodian services in China. 
30. In the past year, China had enfo rced a large quantity of liberalizing measures in the financial 
area.  As a result, the number and market shar es of foreign financial institutions had grown 
dramatically, which indicated that China was implementing its WTO commitments in a  serious and 
positive manner.  To her knowledge, most foreign-funded financial ins titutions were satisfied with the 
enhanced transparency of Chinese policies, the im provement in the operational environment and the 
increase of market access opportun ities after China's accession to the WTO; and had confidence in the 
sustainable and stable growth of China's economy.   
31. The representative of Switzerland  was pleased to hear reports about the progress made in 
terms of liberalization and the e nhancement of transparency in the legal framework.  Since the  S/FIN/M/47 
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 accession to the WTO, the Chinese financial market had become more dynamic and diversified, and 
had been attracting a number of foreign investors.  That was basically a consequence of the accession 
to the WTO and the commitments undertaken.  The le vel of commitments taken by China, as well as 
their beneficial effects, set an example for on-going accessions.   
32. The major problem faced by Switzerland was not with the commitments taken by China.  The 
major remaining barrier was the capital requirement fo r foreign bank entry.  For direct branching for 
foreign banks seeking a corporate banking licence, 300 million RMB (roughly 45 million CHF) was needed.  For a retail banking licence, a further 200 million RMB (roughly 30 million CHF) was needed.  That meant that for universal banking  75 million CHF was needed.  He recognized the 
progress made, especially the fact that for corpor ate banking the capital requirement had decreased 
from 400 to 300 million RMB, but the requirement rema ined very high by international comparison.  
In Switzerland for instance, to conduct all ba nking activities only 10 million CHF were required.  
Unfortunately, no timetable had been given for the revision of these excessive barriers.  He asked the 
Chinese delegation whether they could provide more information on future plans in that regard.  
33. The second difficulty faced referred to the par ticipation in financial institutions.  China 
seemed to limit foreign participation in Chinese banks  to 20 per cent in terms of voting rights, and to 
25 per cent in terms of capital participation.  For securities, the limits were slightly higher - one third 
of the capital - and, according to his understanding, this limit would be raised to 49 per cent by the 
end of this year.  However, he asked whether there were any plans to raise this limit in order to allow 
majority foreign participation or even 100 per cent foreign participation.   
34. He also sought further information on foreign ow nership in investment companies, which was 
originally capped at 25 per cent if several companies were involved or 20 per cent if a single foreign  
company was involved.  There seemed to be discu ssions on the possibility of raising this limit to 49 
per cent.  He sought further information on the status of such discussions. 
35. The representative of Canada
 noted a continued effort on the part of the Chinese government 
to conform to its accession protocol.  A number of concrete examples of progress had been noted in 
Canada's submission for the meeting. The qu estions and comments contained in document 
S/FIN/W/37 addressed issues that continued to conc ern Canadian authorities and for which Canada 
had not been able to gather sufficient or satisfactor y information on a bilateral basis.  Further, these 
issues were raised in the Committee to support an informed multilateral discussion. 
36. Canada sought a better understanding of the pr udential reasoning behind certain regulations, 
and also wished to underline the importance of tran sparency of the regulatory environment in China. 
In particular, a fuller explanation of China's mo tivation behind the imposition of limitations on the 
amount of foreign exchange funding that foreig n banks might acquire from abroad through a new 
quota system would be helpful.  Canada was also in terested in garnering a better understanding of the 
specific aspects of the planned CIRC provincial-le vel licensing regime for foreign life insurance 
firms, and how it would ensure licensing on a national treatment basis with Chinese firms.  Finally, he 
said that Canada would welcome any comments on e fforts in the past year to improve regulatory 
transparency, including public consultation processes  when drafting new legislation or regulations.  
He also expressed the hope that a copy of the Chin ese statement be made available at the end of the 
meeting as it had been done in the past. 
37. The representative of the United States  said that the TRM helped clarify China's 
implementation efforts.  It also served the purpos e of conveying other Members' expectations to 
China.  It could also clarify areas of agreement or  disagreement on particular issues.  The statement 
just provided by China was very informative.  He also hoped that China would respond to the 
questions raised in document S/FIN/W/40.  The qu estions raised by the United States focused on the 
areas of insurance, banking, asset management, a nd pension services.  One theme throughout those S/FIN/M/47 
Page 6  
 
 questions had to do with capital requirements, wh ich seemed to be unnecessarily high in relation to 
international norms.   
38. In the area of insurance, this was a very impor tant time.  On 11 December 2004, all remaining 
geographic restrictions and all remaining product r estrictions would be lifted.  The United States 
welcomed the new regulations in the insurance area that reduced capital requirements.  His questions 
at this meeting focused on three aspects - branch ing, geographic licences, a nd capital requirements - 
where further improvements were sought.  With regard to branching, China had issued new 
regulations and implemented rules calling for non-life insurers to establish subsidiaries.  He asked in 
that regard if China could confirm whether existi ng branches would be able to continue to operate 
under the existing conditions without having to revert to a subsidiary.  He also asked whether China 
would allow non-life insurers already established in China as branches to open branches or sub-
branches even if they had not first established as a subsidiary.  In the licensing area, the United States 
noted that to date foreign insurers had only been  able to apply for one branch at a time, while 
domestic insurers had been able to  apply for multiple branches and ha d been able to seek approval for 
multiple branches all at one time.  He sought further clarification on that process, particularly in light 
of China's commitments on national treatment.  Othe r questions raised by the United States referred to 
the types of geographic licenses available to fore ign insurers.  The United States' submission also 
raised other questions about capital requirements.  
39. The United States also welcomed the liberali zation provided by the provisional measures on 
the administration of the overseas liberalization of insurance of foreign exchange firms which had 
been issued on 9 August 2004.  However, he noted that the qualifying threshold for insurers seemed to 
be extremely high, and sought further information on the rationale for that measure.  
40. Referring to the regulations on the establishment of insurance asset management companies, 
he noted that only insurers that had held licences fo r more than eight years were permitted to apply.  
He considered that would exclude all foreign insure rs that had been established in China since China's 
accession to the WTO.  He sought further clarification on the rationale for that provision.  
41. The United States was also interested in any plans the insurance regulators might have for 
expanding the types of investments that insura nce companies might hold beyond bank deposits and 
various government bonds. 
42. With regard to financial holding companies, he noted that approval had been given to Chinese 
enterprises for financial holding companies to combine insurance,  banking and securities services. 
Once again, he sought clarification on how this would apply to foreign insurers and foreign 
companies.   
43. In the banking area, the United States was seeking clarifications with regard to the branch-by-
branch capital requirements applied.  He asked in th at regard what the current status of the CBRC's 
review of those requirements was. 
44. He also enquired about the capital requirements for joint venture asset management 
companies.  He finally noted that China's sche dule of specific commitments included a commitment 
to open up the pension market by 11 December 2004.  He said that the United States had not seen any 
implementing rule that would allow that commitment to  take effect.  He sought further clarification on 
the status of those implementing rules. 
45. The representative of the People's Republic of China
 agreed to have her statement circulated 
among Members.   S/FIN/M/47 
 Page 7 
 
 
 46. The representative of Australia  encouraged China to continue to ensure transparency in its 
regulatory environment by disseminating information on its regulations to fi nancial services providers 
and by permitting consultative mechanisms to assi st prudential regulators in  developing appropriate 
standards.  He also noted the comments by other Members in relation to the currently high minimum capital requirements across the financial sector.  Au stralia believed that high levels of minimum 
capital requirements hindered foreign providers' access to the financial services sector.  Australia was 
looking forward to responses to the specific ques tions raised in document S/FIN/W/42.  More 
specifically, he noted that the procedures on the ad ministration of foreign debts of foreign capital 
banks issued on 27 May 2004, in addition to the implementing rules released in June by the State 
Administration of Foreign Exchange, had set lim itations on the amount of foreign exchange funding 
that foreign banks could acquire from overseas through the imposition of  a quota system.  In 
Australia's view, these new procedures could have the impact of increasing costs and restricting 
market access for foreign banks particularly tho se having small operations in China.  Furthermore, 
Australia felt that it would adversely affect comp etition in the market and would reduce the access of 
Chinese businesses to the most competitively priced f unding.  Finally, he said that answers to the 
questions raised in paragraph 5 of Austra lia's submission would be very helpful.  
47. The representative of Japan
 said that, as expressed in document S/FIN/W/36, his country 
welcomed specific measures taken by China since th e last TRM to implement its WTO commitments.  
Japan remained interested in ma rket access for foreign suppliers through the effective implementation 
of China's WTO commitments.  Japan had no intention of challenging China's right to introduce prudential measures to which all Members were ent itled.  However, he wondered if some prudential 
measures were really appropriate in the context of th e GATS, that is, if they were really in accordance 
with the commitments and obligations under the GATS and the Annex on Financial Services.     
48. He pointed out that there were still some uncerta in and obscure criteria in the regulations and 
rules dealing with licensing requirements and pro cedures in insurance and  banking.  One example 
was the conversion from branch to subsidiary in th e insurance sector.  Even though it looked as if 
China formally ensured liberaliza tion, the Japanese business community  complaint sometimes that in 
practice the implementation appeared to hinder libera lization.  Therefore, Japan requested China that 
the licences be granted without delay if the license ap plication met the requirements.  As expressed in 
paragraphs 4(a) and 5(a) of the submissi on from Japan, he underscored the importance of 
transparency in licensing requirements and procedures in order to ensure the effective implementation 
of China's WTO commitments.  He also sought clar ification about the prudential reasoning for the 
minimum capital requirements applied to insuran ce companies, which remained very high by 
international standards.   
49. In order to conduct local currency business, a bran ch of a foreign financial institution had to 
meet the qualification of being a three-year busi ness operation in China and being profitable for two 
consecutive years prior to the appli cation.  Japan believed that these qualifications were excessive for 
a prudential measure.  Moreover Japan was of the view  that such an examination should not be carried 
out on a branch-by-branch basis but on a headquarter  basis.  He asked whet her China was considering 
introducing flexibility requirements for newly est ablished branches to engage in local currency 
business, as was asked in paragraph 5(b) of Japan's submission. 
50. Finally, as Australia had also pointed out, Japan  asked if China intended to be more flexible 
in applying the long-term borrowing quotas to foreign invested banks. 
51. The representative of Chinese Taipei
 thanked the delegate from Beijing for her statement, and 
highlighted the importance the Chinese authorities a ttached to the TRM, as evidenced by the presence 
of capital experts.  Since the last TRM session, the Chinese financial authorities had taken a number 
of steps, as mentioned by the Chinese delegate, to  further liberalize the financial market.  Chinese 
Taipei welcomed these steps, was pleased to w itness the increasing level of compliance with the S/FIN/M/47 
Page 8  
 
 accession commitments, and acknowledged China's efforts in this regard.  He finally took note that 
some of the issues raised in document S/FIN/W/41 had been addressed. 
52. The representative of the European Communities
 expressed his concerns about a number of 
remaining barriers.  Some of these had been menti oned by other delegations, and had been previously 
raised in the submission from the European Comm unities (S/FIN/W/39), so he refrained from getting 
into too much detail. The first concern was the minimum capital requirement for branches in the 
banking sector.  There were two issues in that regard .  On the one hand, the extent of those capital 
requirements, which in his view were excessive; an d, on the other hand, the obligation that each 
branch fulfilled capital requirements, rather th an applying them on a consolidated basis.   
53. A second concern was the requirement that 30 per cent of the working capital of foreign 
branches be deposited at a local bank on a list define d by Chinese authorities.  A third concern related 
to the foreign ownership limits in the banking sector , as explained previously by Switzerland.  The 
European Communities had also con cerns about the regulations in th e insurance sector, as stated in 
the submission.  Finally, he added that the Eur opean Communities shared the concerns expressed by 
Japan about the transparency of licensing proce dures and the requirements on long-term borrowing 
quotas.   
54. The representative of the People's Republic of China  replied to the questions raised in the 
following manner.  He referred first to two hor izontal issues: minimum capital requirements and 
transparency.  He said that according to paragraph 11 of the guidelines for the scheduling of specific 
commitments under the GATS,  minimum requirement s, such as minimum capital requirements for 
the establishment of a corporate entity, did not fa ll within the scope of Article XVI.  The capital 
requirements applied by China were transparent, non discriminatory, and applied to domestic service 
suppliers as well.  Therefore, they did not fall within the scope of Article XVII either. China's 
minimum capital requirements were based on pruden tial considerations and set up according to the 
level of development of China's fina ncial sector and the regulatory capacity of the financial authority.  
He reiterated that the determination of minimu m capital requirements was a legitimate right of 
Members when regulating.  He further asked the Me mbers that had referred to international standards 
for capital requirements to tell what those internatio nal standards for financial services were.  In his 
view, Members' right to introduce prudential me asures should not be challenged according to the 
Annex on Financial Services.  Howe ver, certain Members kept on ques tioning the prudential rationale 
of China's capital requirements.  Having said that, he  added that depending on the improvement of the 
risk management system of foreign banks and th e development of China's regulatory framework, 
China's financial regulatory authorities would re lax the minimum capital requirements for foreign 
banks and insurance companies accordingly.  Si nce December 2003 the amount of operating capital 
requirements for branches of foreign-funded banks had been reduced and the categories had been 
simplified.  Based on foreign-funded banks' busine ss development and risk control capacity, China 
would continue to adjust the operati onal capital requirement in the future. 
55. Turning to the issue of transparency, he said th at China had done a lot of work after accession 
to promote transparency in financial services sector s.  In the case of insurance services, the CIRC had 
been implementing its commitments in compliance with  the transparency requir ements set out in the 
GATS.  The relevant licensing requirements and pro cedures were stipulated in the Regulation on the 
Administration of Foreign-funded Insurance Compan ies and in detailed implementation rules which 
could be found on the CIRC's web-site (www.c irc.gov.cn).  In the case of banking services, 
requirements and procedures for market access of fo reign-funded banks in China were illustrated 
adequately in the Regulation on the Administration of Foreign-funded Financ ial Institutions, and in 
the corresponding implementing rules.  Both the Chinese and English versions had been published 
and could be found on the CBRC's web-site (w ww.cbrc.gov.cn).  Furthermore, the CBRC had 
improved the licensing requirements and procedures fo r financial institutions pursuant to the Law of 
People's Republic of China on Administration of Licens ing which went into effect on 1 July 2004.    S/FIN/M/47 
 Page 9 
 
 
 56. In the case of securities, the CSRC had adhered to the relevant practices of the People's 
Republic of China on procedures for public comment when drafting laws and regulations.   The CSRC 
had also had discussions with various interested pa rties, and had made the relevant draft laws and 
regulations known on the CSRC website for public co mment.  Most of the reasonable suggestions 
from the public had actually been adopted in the fi nal version of the regu lations.  Furthermore, 
according to Article 24 of the Provisional Rules on Implementation Procedures on Administrative 
Licensing Matters of the CSRC, if additional writte n explanations or responses from the applicant 
were deemed necessary, the CSRC sh all aggregate all those questions in one written document.  In 
addition, all administrative licence procedures and re levant laws and regula tions could be found by 
applicants on the CSRC website (www.csrc.gov.cn).   Or, they could even be found on the touch 
screen at the entrance of the CSRC premises.  C oncerning the consultation period for the CSRC rules 
and regulations, on 1 July  2002, the CSRC had promulgated Rules on the Establishment of Securities 
Companies with Foreign Shareholding and Rul es on the Establishment of Foreign Management 
Companies with Foreign Shareholding.  Prior to the promulgation, the CSRC had published both draft rules on the CSRC official website for public comment .  Therefore, as could be seen, China had made 
tremendous efforts in ensuring transparency in financial services.   
57. He then turned to questions raised on specifi c sectors, starting with insurance.  The first 
question concerned provincial and regional licensi ng of foreign insurance companies.  As of 
11 December 2004, there would be no geographic restrictions on foreign insurance companies 
anymore.  By that time, foreign insurance compan ies meeting certain qualifications would be allowed 
to apply for the establishment of operational ins titutions nation-wide.  He added that provincial 
branches of foreign insurance companies would be allowed to conduct insurance business in any city 
or area within the province pursuant to the relevant  CIRC regulations.  In other words, branches of 
foreign insurance companies in Ch ina would enjoy the same treatment as domestic ones, and conduct 
business within a specific province.  The approval re gulations and procedures could be found in the 
detailed Rules for Implementation of the Regul ation on the Administration of Foreign-funded 
Insurance Companies. The appli cants for branch establishments, both from home or abroad, were 
equally treated. And foreign companies were enti tled to national treatment.  Moreover, foreign 
branches and subsidiaries had the right to bran ch out within the business scope and business area 
stipulated in their licences.   
58. With regard to the questions on the transf ormation from branch to wholly foreign-owned 
insurance company, he said that the Implementation Rules for the Regulations on Administration of 
Foreign-funded Insurance Companies allowed br anches of foreign funded property insurance 
companies to be changed into wholly foreign-ow ned property insurance companies.  So branches 
could change to wholly foreign-ow ned property insurance companies.  They could remain as branches 
or change their status according to this regulatio n.  With regard to the questions on licensing 
procedures for insurance firms and their branches, he said that according to the relevant CIRC 
provisions, foreign branches were allowed to appl y for conversion to subsidiaries as he had just 
indicated, and that procedure was shown in the detailed Rules for Implem entation of Regulation on 
the Administration Foreign-funded Insurance Compani es.  Additionally, China had issued thus far as 
many as 70 licences to foreign-invested insurers in China.  All these licences had been issued on the 
basis of published licensing procedures.  The number  of licences that the CIRC could grant to foreign 
insurers at one time was based on the licensing pro cedures in the relevant laws and regulations, as 
well as the prudential principle.  The available am ount of sub-branches for one application was not 
statutorily stipulated in the Chinese law, and therefore it was appropriate in his view to set a 
compulsory number of licences for the CIRC to issue to a particular foreign insurer at one time.  In his 
view, national treatment did not mean strict equiva lence in the number of licences for sub-branches 
issued at one time.  What was important for nati onal treatment was that the approval procedure and 
the requirement for sub-branches were equal for both domestic and foreign applicants. S/FIN/M/47 
Page 10  
 
 59. With regard to the questions about further lib eralization of insurance services, he said that 
according to China's commitments, within three years after accession, foreign insurers would be 
permitted to provide health insurance, group insu rance and pension to fo reigners and Chinese 
customers.  He explained that the regulations  for the implementation of the above-mentioned 
commitments were being drafte d and would come out soon.  
60. He then addressed the questions concerning th e regulations on investment by insurance 
companies. He said that all these issues fell under the right of Chinese regulatory authorities to 
regulate this sector. Firstly, pursuant to CIRC's Provisional Measures on the Administration of the 
Overseas Utilization of Insurance Foreign Exchange Funds, the qualifying threshold for insurers to be 
able to invest their foreign exchange funds in overseas funds or equities was applied to both foreign 
and domestic insurers based on prude ntial considerations.  Secondly, the CIRC's Interim Regulations 
for Insurance Assets Management Companies required  that only insurers that had held licences for 
more than eight years were permitted to apply to establish an insurance assets management company.  
This was also non-discriminatory and based on pruden tial considerations.  Thirdly, he said that there 
were no plans to review existing investment  regulations for insurance companies.   
61. Fourthly, with regard to the establishment of  financial holding companies, the memorandum 
of understanding signed in June 2004 on the division of responsib ilities and co-operation in financial 
supervision and regulation among the CPRC, the CS RC and the CIRC stipulated how China regulated 
financial holding companies in case of separate supe rvision of the different lines of financial business.  
Article 8 of the memorandum stated that the supervision of a financ ial holding company should 
adhere to the principle of separate supervision of different lines of business.  The supervision of the 
financial holding company's parent rested with th e relevant commission in accordance with the nature 
of the company's principal business.  The different subsidiaries of a financial holding company were under separate supervision in accordan ce with the nature of each subsidiary's business activities.  If a 
financial institution had overseas establishments, its respective supervisory commission should 
exercise the supervision over the overseas establishm ent and establish a working relationship with the 
host country supervisory authority.  If a financia l holding company were established by a commercial 
business entity, its supervision and regulation shoul d be exercised in accordance with relevant 
arrangements, jointly worked out by the three commissions.  Finally, regarding the recognition of 
actuaries from other Members, he said that th is recognition was subject to mutual recognition 
agreements and was in conformity with the relevant GATS provisions. 
62. He then turned to the questions on banking.  Firstly, he said that China required that 30 per 
cent of the working capital of a fore ign bank branch be maintained in  the form of interest bearing 
assets as prescribed by the supervision authorities, including deposits in Chinese commercial banks or 
RMB government bonds, with a view to keeping a ce rtain amount of funds to pay primary creditors 
when a foreign bank branch closed.  Due to the fre quent capital inflows and outflows in foreign bank 
branches in China, the authorities could not ensure e ffective supervision of those funds if they were 
allowed to be lodged with these banks.  This was also in line with the common practice of many 
Members that required a proportion of working capital to be maintained in the form of interest bearing 
assets being deposited in other banks or used to pur chase investment instrument s with low risks such 
as government bonds. 
63. Secondly, with regard to the equity particip ation in existing Chinese domestic banks, he said 
that China's schedule of commitments only allowe d foreign banks to establish subsidiaries, and 
branches in China without any limitation on foreign e quity participation.  However, in line with the 
development of China's banking sector, China gradua lly relaxed the restriction on the foreign equity 
share in existing domestic banks.  In fact, Chin a believed that was beyond its WTO commitments.  
Since the end of 2003, China had already increased the equity share of a single foreign investor to 20 per cent from the previous 15 per cent, so long as the e quity share of the total foreign investment in a 
financial institution was lower than 25 per cent.  The nature and the business scope of the targeted  S/FIN/M/47 
 Page 11 
 
 
 bank remained unchanged.  In the future, China w ould continue to relax the limitation on foreign 
equity participation in domestic ba nks in line with changing situations and with a view to promoting 
co-operation between domestic and foreign banks in various fields. 
64. The question was also raised as  to whether China was consider ing to introduce flexibility in 
the requirement for duly established branches to enga ge in local currency business.  He replied that 
the sector column of China's schedule of specific commitments stipulated specific preconditions for 
foreign banks and branches of foreign banks to conduct local currency business.  Therefore, the 
requirement was in the schedule and was also  in accordance with the regulations on the 
Administration of Foreign-funded Financial In stitutions and the Rules for Implementing the 
Regulations on the Administration of Foreign-funde d Financial Institutions.  Foreign-funded banks 
should meet the following requirements when applying  for local currency business:  they must have 
been operating in China for more than three years prio r to application;  they should remain profitable 
for two consecutive years; and they should comply with other prudential c onditions required by the 
CBRC.  Those qualifications were important foundati ons for the sound operation and risk control of 
foreign funded banks.  He added that the CBRC ha d no intention of revising these qualifications. 
65. The next questions referred to the administrati on of foreign debts of foreign capital banks in 
China.  He stated in that regard that the imposition of regulations on foreign debts of foreign invested 
banks was the sovereign right of the Chinese g overnment to regulate.  According to the 
Administrative Measures on Foreign Debt of Forei gn-invested Banks in China, and the notice on 
several issues related to the implementation of th ese matters promulgated by the State Administration 
of Foreign Exchange, China imposed the balance administration over the short-term foreign debts 
incurred by foreign banks.  The balance for the y ear 2004 was determined by averaging the balances 
at the end of the last five months or by multiply ing the actual received capital or operational fund by 
five.  Generally speaking, the determination of the foreign debt index was quite loose.  The 
determination of the 2005 short-te rm foreign debt would be conduc ted by putting the actual demand 
of foreign banks as a priority.  He added that th e loans in foreign currency and the capital would be 
taken into consideration wh ile determining the short-term foreign de bt balance.  At the same time, the 
transparency of the determination would be ensu red by the strict observance of the procedural 
regulations of the law on administrative licensing.  He added that given the fact that China had not made any commitments on foreign debts and that the balance determination for short-term foreign 
debt was also imposed on domestic banks, therefore on a national treatment b asis, he believed that 
China had not violated its commitments on market access or national treatment.   
66. He then addressed the question on Article 30 of  the Administrative Regulation on Foreign-
invested Financial Institutions, which set a 70 pe r cent limit on foreign bank holding of foreign 
currency deposits.  This requirement was based on pr udential considerations.  Thus far, the competent 
regulatory committee had not found any single bank ha ving difficulties to meet this requirement.  All 
banks in China easily met this requirement, which di d not affect any of their businesses in the country.  
China did not think that this requirement constitute d a market access barrier.  He added that this 
regulation was needed for prudential considerations.   
67. He then replied to the question on the remittanc e of foreign currency a nd exchange of RMB. 
He said that since the commitments undertaken on Article VIII of the IMF in December 1996, the 
Chinese government had been keeping its promises  of convertibility of the RMB and the current 
account.  There were no restrictions against payment and transfers in relation to transactions of trade 
in services.  In order to keep in line with the inte rnational practice, and with a view to separating the 
transactions under the capital account from those under the current account, and impeding illegal 
exchange arbitrage, money laundering and othe r crimes; the State Administration of Foreign 
Exchange required that valid certificates or docum ents be provided when making payment in foreign 
exchange related to transactions of trade in services.   Such practice fully complied with the provisions 
in Article VIII of the IMF and Article XI of the GATS.  With a view to facilitating services trade, the S/FIN/M/47 
Page 12  
 
 Chinese government adopted a series of measures to  regulate and simplify the procedures of checking 
and reviewing the authenticity of the payment in foreign exchange.  Commercial banks were 
authorized to check and review the authenticity of  the payment in foreign exchange by themselves, 
subject to the documentation required.  Coordinati on among relevant departments of the government 
had been enhanced in order to serve foreign comp anies better.  These measures had greatly facilitated 
the business activities of foreign-invested comp anies in China.  Following the principle of 
convertibility of foreign exchange and current accounts, the Chinese government would  make efforts 
to improve the administration on purchasing and ma king payments of forei gn exchange related to 
transactions of trade in services, simplifying the procedures of checking and reviewing the 
authenticity of payments in foreign exchange, and gradually changing the situation from prior 
management to management ex post facto .   
68. Lastly, he addressed the questions on securiti es services.  He said that he had already 
provided an answer to the question on capital requi rement.  Regarding equity limitations, he said that 
the equity sharing was clearly indicated in the Chine se schedule.  He stated that further liberalization 
should be pursued in the current round of services negotiations, and not in the context of the TRM 
process.  
69. The representative of Switzerland
 said that the answers given by China represented a 
tremendous effort and showed how  seriously China took the TRM. He took note of those answers, 
particularly the statement by China that it would continue to adjust the capital requirements in the 
future.  That was a very positive signal.  He also not ed that, with regard to equity participation in 
Chinese banks, China intended to continue to release the relevant pieces of legislation.  Finally, he 
reacted to one aspect of China's replies referring to  prudential measures.  He acknowledged that there 
were very extensive and active discussions on th ese issues.  Switzerland fully accepted the current 
situation in the GATS in terms of prudential me asures.  He was convinced that that was the 
appropriate way.  Basically, what the Annex on Financial Services said was that Members were free 
to introduce any prudential measures that they deemed appropriate.  That meant in concrete terms that 
even if a Member introduced a "none" in its schedul e of specific commitments, it still remained free to 
introduce any prudential measures.  However, that di d not mean that prudential measures were outside 
the scope of the Agreement;  they were within the scope, but subject to a lax rule.  And that did not 
mean that Members were not allowed to discuss such measures.  
70. The representative of the United States  said that he understood the position of China with 
regard to capital requirements.  Nevertheless, he urged China's regulators to continue to have a 
dialogue with interested parties on the level of those capital requirements in various sectors.  He 
further sought two clarifications on the questions raised by the United  States.  Firstly, he asked China 
to clarify whether it would allow non-life insurers already established as a branch in China to open 
sub-branches even if they did not first establish as a subsidiary (question 1(b) in document 
S/FIN/W/40).  Secondly, he asked whether China could confirm that the RMB 200 million capital 
requirement for initial establishment as a branch in cluded the right to establish sub-branches without 
limitation on numbers and without having to satisfy  any additional capital requi rements (question 4(a) 
in document S/FIN/W/40).   
71. The representative of Japan  said that his delegation had no intention of challenging China's 
legitimate right to introduce prudential measures.  However, Japan believed that the Member in 
question should be held accountable for the degr ee of such prudential measures.  In light of 
paragraph 2(a) of the Annex on Fina ncial Services, Japan was of the view that China had to justify the 
appropriateness of the prudential means in question in  order to attain the prudential objectives.  From 
that point of view, Japan believed that it had the le gitimate right to ask for further clarification with 
regard to excessive prudential measures, e.g., with  respect to the requirement for newly established 
branches to engage in local currency business, and with respect to the application of long-term 
borrowing quotas to foreign invested banks.  Since foreign banks in China relied mostly on financing  S/FIN/M/47 
 Page 13 
 
 
 from the headquarters, they were facing a serious  problem in conducting banking business.  Such a 
long-term borrowing quota was not in line with the commitments on national treatment.  He finally 
asked whether China could circul ate the responses just given. 
72. The representative of the European Communities  said that they resp ected China's right to 
prudential regulation.  However, he insisted that  these rules, especially the capital requirements, 
should not be excessive.  With regard to owners hip limits in the banking sector, he noted China's 
reply that these limits were not beyond its commitm ents.  However, he asked whether China could 
elaborate further on that matter, since he could not  find such a limitation in the Chinese schedule of 
specific commitments.  He welcomed the Chinese inten tion to relax both types of restrictions in the 
future.  
73. The representative of Canada  said that despite the explanation on the licensing procedures for 
life insurance at the provincial level, it remained unclear whether the provincial licence, once granted, 
would allow the establishment of multiple branches an d sales offices within the territory without prior 
approval, as was the case at present.  Finally, he encouraged standardized and transparent processes 
across all the financial sector regulatory bodies, pa rticularly with regard to public consultation on 
draft measures, including implementing rules.  
74. The representative of Australia  asked whether China would circulate the responses just given.  
75. The representative of the People's Republic of China  said that the initial statement provided 
for circulation, together with the oral answers pr ovided in the course of the meeting, were sufficient 
for a meaningful review.  China was of the vi ew that providing written answers to Members' 
questions went beyond the provisions of paragraph 18 of the Accession Protoc ol and would be overly 
burdensome for China.  He further clarified that br anches or subsidiaries were allowed to branch out 
in China within the business scope and the business ar ea stipulated in their licences.  Additionally, 
with regard to capital requirements, he said that foreign funded companies were required to have 
RMB 200 million of capital at initial entry to China.  The provisions on sub-branches could be consulted in the detailed Rules for Implementation of Regulations of the People's Republic of China 
on the Administration of Foreign-Funded Insurance Companies.  The capital requirement per branch 
was in compliance with the prudential principle and intended to provide equal treatment for all 
insurers, both domestic and foreign.  He further considered that the key element in assessing the 
prudential aspect of a measure was whether it was prudential in that particular Member.  Therefore, the most important elements to be taken into cons ideration to judge what w as prudential for a Member 
were the level of development of that Member's fi nancial sector and the regulatory capacity of that 
particular Member.   
76. By way of conclusion, the Chairperson
 invited the Committee to take note of all the 
statements made.  Secondly, he requested the Secret ariat to prepare a report, to be presented to the 
Council for Trade in Services.  It would be a factual report, stating basically the following:  
(a) that, pursuant to section 18 of the Protocol on the Accession of the People's Republic 
 of China, the Committee had conducted a re view of the implementation by China of 
the  WTO Agreement and of related provisions of the said Protocol, in the meeting held 
 on 23 November 2004;  
(b) that written communications had been received from six Members, namely 
 Japan, Canada, the European Communities,  the United States, Chinese Taipei, and 
 Australia;  and 
(c) that the details of the discussion, including all the interventions made at the meeting, 
 would be found in the meeting report, to be issued as document S/FIN/M/47. S/FIN/M/47 
Page 14  
 
 77. The Committee so decided
.  
C. ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN 
SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS  
78. The Chairperson  recalled that three WTO Members had yet to accept the Fifth Protocol, 
namely:  Brazil, Jamaica, and the Philippines.   She invited these three Members to provide 
information on the status of their domestic processes. 
79. The representative of Brazil  said that the Fifth Protocol was still pending approval by 
Congress.  It was difficult to foresee any precise timeframe for its approval.  
80. The representative of the Philippines  said that the acceptance of the Fifth Protocol was still 
undergoing due legislative process in his country, the details of which had been  explained in previous 
meetings.  The Senate, which was responsible for the acceptance of the Protocol, had been recently 
organized following elections in the Philippines.  It was not possible to indicate the concrete timeframe for such approval at this stage.  
81. The representative of Jamaica
 said that the process of reform in the financial sector was at an 
advanced stage.  It was Jamaica's desire to have  a regulatory framework that contribute to enhance 
confidence, efficiency and a high level of consumer protection.  Jamaica continued  to benefit from a 
highly liberalized environment for financial services, despite the fact that the country had not been in 
a position to ratify the Fifth Protocol to the GATS.  As Jamaica prepared for participation in the 
current round of services negotiations, the issue of ratif ication of the Fifth Protocol remained high in 
the list of priority areas for consideration.  She was unable at that point to indicate a precise timeframe 
for the acceptance of the Protocol.  National consultati ons were being held with a view to finalizing a 
decision on this issue.  She finally added that Ja maica remained committed to an open and liberalized 
financial sector.  
82. The representative of Switzerland  said that acceptance of the Protocol by these Members was 
already very long overdue.  Members were currently engaged in another negotiating exercise.  It was 
not clear what timetables were foreseen in these pr ocesses.  It was not clear either to what extent 
governments were trying to involve themselves in t hose internal procedures in order to raise the 
priority level of the Fifth Protocol.  
83. The representative of the United States  said that her country remained very concerned about 
the lack of acceptance of this Protocol.  She noted  that the three Members had in fact reported that 
there was no movement whatsoever on this matter.  The United States was worried that this situation 
might continue in a protracted fashion.  She ur ged these delegations to move the process forward.  
84. The representative of Canada  expressed his concern on this issue.  He expressed interest in 
any information how the Congressional calendars deve lop in these countries, so that Members might 
have a clearer sense of when adopti on of the Protocol was possible. 
85. The representatives of Japan and Norway  also expressed their concern for the lack of progress 
in this agenda item.  
86. The Chairperson  expressed her appreciation for the info rmation provided by Brazil, Jamaica 
and Philippines and encouraged these three Members to  accelerate their internal procedures for the 
acceptance of the Protocol. 
87. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting.  S/FIN/M/47 
 Page 15 
 
 
 D. T ECHNICAL ISSUES  
88. There were no interventions under this agenda item 
89. At the suggestion of the Chairperson, the Committee decided  to revert to this agenda item at 
the next meeting. 
E. R ECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE  
90. The Chairperson  recalled that at the last meeting, the Committee continued its consideration 
of the communications submitted by Norway on mari ne and energy insurance, and by Turkey on e-
insurance initiatives by Turkish companies.  In a ddition, Mexico made a thorough presentation on the 
Modernization of the Mexican Financial System, in  which the most recent changes to the Mexican 
legal framework were explained.  She also reca lled that Chinese Taipei announced its intention to 
make a presentation on the recent changes introdu ced to its regulatory framework for financial 
services.  
91. The representative of Chinese Taipei , Mr KONG Jaw-Sheng, Chairperson of the Financial 
Supervisory Commission, took the floor to make his presentation, entitled "A New Era of Financial 
Supervision". 
92. He started by providing an update of the situa tion in the financial market.  In banking, the 
authorities managed to reduce the NPL ratio from eight per cent in April 2002 to 3.3 per cent in 
September 2004.  This was a significant achieve ment.  The Commission was currently expediting 
industry consolidation, since Chinese Taipei was overbanked.  The challenge was to reduce the 
number of banks.  National champion banks that c ould play a significant role in the region were 
needed.  At present, the top five banks market share was only 36 per cent.  Compared to other 
financial systems, that share was still not high enough.  The trading volume in the capital market 
ranked second in Asia, after Japan.  In terms of ma rket capitalization, Chinese Taipei ranked third in 
Asia, after Japan and Hong Kong, China.  Foreign port folio investment was also growing.  In terms of 
annual premium income, Chinese Taipei's insurance market ranked third in Asia, after Japan and 
Korea.  
93. The main reasons for establishing the Fina ncial Services Commission (FSC) were the 
following: the prevalent global trend towards th e establishment of single financial regulatory 
agencies; increasing cross-sector business among banking,  insurance, securities and futures industries; 
and the consequent need to have more professi onal and focused supervision.  The FSC was an 
independent authority.  The Chairperson and th e Commissioners were nominated and appointed by 
the highest levels of government.  They all had a professional background, were prohibited from 
participating in political activities; and had a fixed term of office.  
94. The FSC was in charge of supervising banking, in surance, securities and futures industries.  It 
had quasi-judicial power, similar to prosecutor power.  A joint regulatory committee composed of the 
FSC, the Central Bank and the Ministry of Finance,  had also been established to coordinate major 
policy issues.  The FSC missions included mainly the promotion of globaliza tion and deregulation of 
financial services; the maintenance of financial stab ility; and the development of Chinese Taipei as a 
premier regional asset management and fund raisi ng center.  The main challenges for the future 
included creating a service-driven supervisory cultu re; enacting a "Single Financial Services Act"; 
expediting industry c onsolidation; and encouraging further fo reign participation.  Chinese Taipei 
already allowed foreign ownership in the financial sector up to 100 per cent, and encouraged foreign 
management in the financial industry.   S/FIN/M/47 
Page 16  
 
 95. The FSC encouraged further co-operation be tween the WTO and international standard-
setting organizations, as well as further liberalization of trade in financial services.  He finally said 
that the FSC remained firmly committed to the early completion of Doha negotiations.  
96. The representative of Japan
 noted that after the Asian financial crisis in the 1990's, Chinese 
Taipei made significant efforts to keep financ ial markets active and open to global financial 
transactions.  He asked whether Mr Kong could ela borate further on the actions taken in liberalizing 
trade in financial services. 
97. The representative of Mexico  considered that the presentation highlighted the importance of 
having single regulatory authorities.  He asked what  disciplines and procedures the FSC followed to 
implement its regulations.  He further asked whet her these procedures were public, and whether it was 
possible to make comments at different stages of the drawing up of regulations. 
98. The representative of the Republic of Korea  said that what mattered most was not whether 
regulation was carried out in an integrated singl e agency but how efficiently and effectively the 
regulatory agencies face the challenges imposed by financial regulation and supervision. 
99. The representative of the People's Republic of China  said that the level of banking regulation 
and supervision was an important criterium to eval uate a Member's financial development.  Only 
when sound management and effec tive regulation and supervision we re put in place could a Member 
ensure its banking systems safety and steady economi c development.  China was making efforts to 
ensure that foreign banks develop in China, upgradin g the supervision expertise and efficiency in the 
sector.  Having said that, he profited from this o ccasion to give a brief account on the progress made 
by China with regard to banking regulation and supe rvision.  First, China had promoted financial 
legislation, simplified licensing procedures and e nhanced policy transparency.  The Law of the 
People's Republic of China on Banking Regulation and Supervision entered into force on 1 February 
2004.  For the first time, the objectives, principles and rules had been defined in order to enhance 
banking regulation and supe rvision.  This law bound not only fi nancial institutions but also banking 
regulators.  In line with the demands of superv ision and banking development, the CBRC had also 
established a series of regulations and rules.  Secondl y, learning from international best practices and 
accelerating the innovations in banking supervisio n, China established a council of international 
advisors composed of renowned expe rts so as to push the adoption of best practices and enhance risk-
based supervision in China.  China had also emba rked in a self-assessment of the implementation of 
Basel Core Principles for Effective Banking Supervis ion.  Co-operation with other regulators around 
the world was also promoted in order to impr ove China's supervisory techniques and measures. 
Thirdly, as part of the measures and instruments to  improve banking regulatio n and supervision, and 
pursuant to international best practices, the CB RC established a risk-weighting system for the 
supervision of foreign banks, through which fore ign bank branches were subject to Strength of 
Support Assessment (SOSA) and Risk Management, Operation and Control, Compliance, and Asset 
Quality Systems (ROCA weighting systems).  The CBRC also insisted on consolidated supervision 
and risk-based supervision by enhancing cro ss-border supervision and implementing specific 
supervision.  With the above-mentioned measures, China had been able to establish a framework of 
effective banking regulation and s upervision, and push forward fair competition mechanisms between 
local and foreign banks. 
100. The representative of Switzerland  asked what type of policies and initiatives were envisaged 
in order to promote Chinese Taipei as a regional center for asset management and fund raising.  He 
also added what means were foreseen to attract fo reign expertise and presence in that sector in order 
to make it more dynamic and reach international standards. 
101. The representative of Malaysia  said that her country was also committed to further 
strengthening the domestic industry and progressively  opening the market.  Malaysia was committed  S/FIN/M/47 
 Page 17 
 
 
 to further liberalization of financial services,  but based on progressive liberalization and the 
strengthening of domestic participation.  She en couraged other Members to share their national 
experiences so as to contribute to the discussion in the Committee. 
102. The representative of Chinese Taipei  (Mr. Kong, Jaw-Sheng) replied to the various questions 
raised.  Referring to the question raised by Japan , he said that after the initiatives undertaken in the 
1990s to open up the market, the emphasis now was on the creation of a service-driven supervisory 
culture.  The regulator needed to know the mark et needs and pay more attention to communicating 
with the industry.  Following long periods of over-regulation, the priority was now placed on 
deregulation and globalization of the financial system .  The situation in the market was constantly 
monitored through weekly meetings of all commi ssioners.  Communication with the public and the 
media was also encouraged.  Referring to Mexico's question, he said that regulatory procedures were 
kept in line with international best practices, pa rticularly in areas such as corporate governance, 
disclosure, transparency, consumer and investor  protection, and supervision of cross-border 
establishments.  On the question raised by Switzerla nd, he said that the existence of a large trade 
surplus and important internati onal reserves made Chinese Taipei a suitable center for asset 
management and fund raising.  Foreign participa tion in the market, as well as the presence of local 
institutions overseas, was encouraged.  
103. The representative of Hong Kong, China  considered that the presentation was interesting and 
said he would comment on it at a future meeting. 
104. In concluding, the Chairperson  expressed her appreciation for Mr. Kong's presence in the 
Committee on behalf of the Financial Supervisor y Commission of Chinese Taipei.  The presentation 
was very helpful.  She encouraged other Memb ers to share their experiences with regard to 
supervisory aspects, which were an important element for the expansion of trade in financial services.  
105. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting. 
F. D ATE OF THE NEXT MEETING  
106. The Chairperson  suggested that the Committee hold its next meeting during the next cluster 
of services meetings, probably in February 2005.  Th e exact date would be announced in due course.  
107. The Committee so agreed . 
G. O THER BUSINESS  
(a) Plurilateral Financial Standards and their Re gulation: The Experience of Small Developing 
Members of the WTO 
108. The representative of Antigua and Barbuda  made a statement with regard to the proposal 
submitted by Antigua and Barbuda, Belize, Fiji Islands, Guyana, Pa pua New Guinea, The Maldives, 
Solomon Islands and St. Kitts and Nevis on "The  GATS and the Annex on Financial Services - 
International Regulations and Fina ncial Services", contained in documents S/FIN/W/29 and Rev.1 of 
August and October 2003, respectively.  In that paper, the proponents sought to address certain 
specific concerns of small vulnerable economies as  they related to the GATS and the Annex on 
Financial Services.  In these Members' view, the mu ltilateral trading system ne eded to identify and 
implement responses to the issues raised in th at submission to overcome the inherent economic 
disadvantages faced by small vulnerable economies. S/FIN/M/47 
Page 18  
 
 109. In the previous meeting of the Committee, Antigua and Barbuda once again defended this 
issue, which was simply aimed at ensuring greater fairness and participation by all in the process of 
setting genuinely international sta ndards for the regulation of financial services.  At that meeting 
unfortunately, very few Members made interventions  on the item.  He expressed appreciation for the 
comments by those delegations.  He believed that only dialogue and debate on the issue would yield 
an optimal outcome for the benefit of all. 
110. He recalled that, as a result of the insufficiency of formal and/or informal interventions on 
this proposal at the last meeting, the Chairperson su ggested that "further treatment of this issue along 
the current lines in the Committee may not lead us mu ch further, and that interested Members would 
better first meet and explore any other possible options.  Depending on the outcome, the Committee 
would then take up the issue again at an appropriate  time in the future." He thanked the Chairperson 
for that wisdom as indeed it would be fruitless to op en the item for discussion if silent on the issue. 
But the question did remain of how to ensure that  the international regula tion of financial services 
become an inclusive process for small developing Me mbers of the WTO.  Trade in financial services 
for many of these small countries, in an attemp t to diversify their economies, had assumed a 
paramount importance in securing economic growth and viability. 
111. He said that the problem was that while small developing states were invariably excluded 
from the process of formulation of international financial standards and regulations, they were 
unwilling objects of international regulatory author ities.  This was not because of any lack of 
solidarity on their part with the stated goals of  these bodies in ensuring stability and security within 
the international financial system.  But small deve loping countries were not part of the standards 
formulation process, they had no say in the developm ent of these standards or regulations, and many 
of these had negative effects on their development prospects.  This absence from the formulation 
process had already had important consequences for the development and ultimate legitimacy of the 
financial standards emerging from these standards- setting bodies and the process of globalization of 
financial regulations.  Further, there was growing ev idence that the application of these standards, at 
times coercive, risked being extended to other intern ational fora, such as multilateral financial and 
trade institutions like the WTO. 
112. He added that he would not press the point fu rther.  His intention was only to let the 
Committee know that while Antigua and Barbuda a nd the other proponents had not asked for this item 
to be discussed separately, they nonetheless thought th at it was important and wished to return to the 
item in the future.  He took the wise suggestion by the Chair that interested parties should consult on 
the issue.  He went further by suggesting that as some Members had suggested  in the past, the issue 
did need further clarification and further elabor ation, which Antigua and Barbuda would provide 
despite scarce resources and other constraints.  In the future however, Antigua and Barbuda wished to 
ignite interest in a manner that would encourage discussion towards a solution.  In spite of knowing 
the problem, the proponents did not proclaim to have  all the answers and as the WTO was a Member-
driven institution, they were open to suggestions  from other Members on what, from their viewpoints, 
might be possible approaches to resolving this pr oblem.  The aim was to find a solution that would 
make the proponents comfortable.  He thanked agai n the Chairperson for her leadership, and looked 
forward to working with her and other Me mbers on this issue in the near future. 
113. The Committee took note
 of the statement. 
__________