RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/M/53 
30 November 2006 
 (06-5752) 
Committee on Trade in Financial Services  
 
  
REPORT OF THE MEETING HELD ON 27 NOVEMBER 2006 
 
Note by the Secretariat
1 
  1. The Committee on Trade in Financial Services held a meeting on 27 November 2006, under 
the Chairmanship of Mr. Ragui El-Etreby (Egypt).  The agenda is contained in airgram WTO/AIR/2933.  
A. A
DOPTION OF THE ANNUAL REPORT TO THE COUNCIL FOR TRADE IN SERVICES  
2. The Committee adopted  the annual report to the Council for Trade in Services, as contained 
in document S/FIN/W/54.  
B. ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GE NERAL AGREEMENT ON TRADE IN 
SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS  
3. The Chairman  recalled that three WTO Members had yet to accept the Fifth Protocol:  Brazil, 
Jamaica, and the Philippines.  He invited these Memb ers to provide information on the status of their 
domestic processes. 
4. The representative of Brazil  said that the situation had not changed since the last report made 
to the Committee.  He added that the Brazilian Congress was still examining new legislation on the 
reinsurance sector and before that process was completed, Brazil was unable to accept the Fifth 
Protocol.  Parliamentary elections had been held recently in his country, and a new Congress might 
take office in February.  
5. The representative of the Philippines  said that there was no news to report on this matter.  He 
indicated his delegation's willingness to have bila teral discussions with those Members that had 
expressed concerns about the delay in accepting the protocol. 
6. The representative of the United States  expressed her concern that no status report had been 
heard from Jamaica, and urged the three Member s to accept the Protocol as soon as possible. 
7. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting. 
C. TECHNICAL ISSUES  
8. The Chairman  explained that, pursuant to the mandate given by the Committee, he was still 
exploring the proposal made by some Members to invite the international standard-setting 
organizations to give a seminar or briefing session on matters relevant for the Committee's discussion 
                                                      
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/FIN/M/53 
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  on the distinction between modes 1 and 2 in financia l services.  He had not yet found a basis on which 
a consensus could be reached on this matter.    
9. The Committee took note
 of that statement and decided  to revert to this agenda item at the 
next meeting. 
D. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE  
10. The Chairman  highlighted the importance of this age nda item, in order for the Committee to 
stay updated on recent developments affecting financia l services trade, at national, regional or global 
level.  In his view, presentations on national experiences had turned out to be very interesting and 
informative.  He encouraged all Members to come up with more presentations or statements of that 
kind.  Additionally, these presenta tions could be complemented with discussions on bilateral or 
regional integration initiatives, or on global trends affecting trade in financial services. 
11. The Committee took note  of that statement and decided  to revert to this item at the next 
meeting.  
E. TRANSITIONAL REVIEW UNDER SECTION 18 OF THE PROTOCOL ON THE ACCESSION OF THE 
PEOPLE 'S REPUBLIC OF CHINA  
12. The Chairperson  recalled that the Committee was manda ted to conduct this review pursuant 
to section 18 of the Protocol on the Accession of th e People's Republic of China.  For this year's 
review, written communications had been received in advance from the following Members:  Japan (S/FIN/W/51);  the European Communities (S/F IN/W/52);  the United States (S/FIN/W/53);  
Australia (S/FIN/W/55);  and Canada (S/FIN/W/56). 
13. The representative of China
 said that his country had ma de extensive and far-reaching 
commitments in the financial services sector.  Sin ce its entry into the WTO in 2001, China had made 
tremendous efforts in implementing those commitments .  And as a result, its financial sector was 
more open than that of many advanced Members.  Before this meeting, China had submitted to the 
Secretariat information as per A nnex 1A of China's Protocol of Accession.  That submission 
contained detailed information re garding new laws and regulations, as well as new licenses granted to 
foreign financial service providers in China since the last transitional review.  He added that the 
document should be circulated to the Council on Trade in Services. 
14. He noted that some Members had provided ques tions only five days before this meeting, 
which left  little time to prepare the answers.  The questions had to be translated into Chinese, 
circulated to competent authorities who provided rep lies in Chinese, and then translated back into 
English again.  He urged Members to submit their questions within a reasonable period in advance of 
the meeting.  Also, some Members had repeatedly raised questions which were irrelevant to the 
transitional review process;  some of them even  going as far as asking China to liberalize further, 
beyond its existing commitments.  He urged Members not  to do so in the future.  Nevertheless, China 
had consistently adopted a positive attitude towards the transitional review process, and had always 
attached great importance to the opportunity to exchange views with Members regarding their 
questions.  China was represented by a strong de legation composed of representatives from the 
Legislative Office of the State Council, the Peopl e’s Bank of China (PBC), China Banking Regulatory 
Commission (CBRC), China Securities Regulatory Commission (CSRC), Xinhua News Agency, and the Ministry of Commerce. 
15. He then turned to the questions recei ved, starting with those related to insurance services .  
With regard to the right of internal expansion fo r different forms of non-life insurance companies, he 
said that subsidiaries and joint ventures were lega l persons while branches were not.  Only legal  S/FIN/M/53 
 Page 3 
 
 
  persons could set up branches and sub-branches.  He  added that there was no discrimination against 
foreign insurance companies in th e granting of approvals for setti ng up insurance companies.  The 
approvals followed the same regulations and rules. 
16. With regard to the scope of the grandfather cl ause for China’s insuran ce sector, he suggested 
Members refer to China’s Schedule of Specific Commitments.  
17. He noted that the issue of the conversion from branches to subsidiaries was not relevant for 
the transitional review process. 
18. On the questions about registered capital requirements for the expansion of established 
insurance companies, he said that the requirement  was based on prudential principles, and there was 
no discrimination against foreign insurance companies. 
19. In the case of reinsu rance, he explained that the 2005 Regulations on the Administration of 
Insurance Business did not impose a mandatory requ irement on direct insurers to cede reinsurance 
business in China.  They only needed  to comply with the requirement for the right of first bid for 
domestic admitted reinsurers.  He added that these regulations did not prohibit cross-border 
transactions of reinsurance businesses, but required the cross-border transactions to comply with 
relevant laws and regulations.  Ex cept for the requirement that the foreign direct insurers needed to 
get approval when they ceded in surance to a parent or affiliate company, other reinsurance 
transactions by foreign direct insurers were subject  to the same rules as those by domestic direct 
insurers. 
20. Regarding the planned injection of additional capital into China Reinsurance Company, he 
considered that the action was a commercial activity  by the this Company, and was not relevant to 
China’s commitments in the WTO. 
21. He then commented on  the requirements on general and chief representatives, including 
residency requirements, contained in the M easures on Administration of Chinese Representative 
Offices of Foreign Insurance Institutions.  China was of the view that they were motivated by 
prudential reasons and were necessary for representati ves of foreign insurance institutions to carry out 
their normal duties.  
22. Regarding the qualifying threshold for insurers to invest their foreign exchange funds in 
overseas funds or equities, he reiterated that these requirements applied to both foreign and domestic 
insurance companies, and were necessary to prot ect against excessive risk for overseas investment. 
23. He confirmed that the provisions relating to ov erseas investment in stocks listed in "mature" 
markets applied to both domestic a nd foreign insurance companies. 
24. He also said - with respect to the qualifi cation requirements on insurance companies for 
setting up asset management companies - that these applied to all insurance companies operating in 
China, both domestic and foreign, and were necessary to ensure the safety of assets under 
management.  
25. In his view, the issue of outsourcing requirements for asset management business was not 
relevant to China’s commitments.  Finally, concerni ng the revision of China's Insurance Law, a draft 
revision had been submitted to the State Council for review. 
26. He then turned to banking and related services .  He said that the requirement that foreign-
funded banks be allowed to conduct local currency business for all kinds of clients after incorporation 
in China were of a prudential nature, aiming to regulate and supervise in a more effective and S/FIN/M/53 
Page 4  
 
  comprehensive manner.  Encouraging foreign banks to establish local subsidiary entities or transform 
exiting branches into subsidiaries was mainly  based upon the following considerations: 
(a) First, the laws and regulations of many Memb ers prescribed that, in terms of the order 
of debt repayment, domestic depositors en joyed priority over overseas depositors.  
Since foreign bank branches in the host count ry were operational ex tensions of their 
parent banks, once the parent bank encountered  liquidity risk or payment crisis, the 
depositors of the branch in the host count ry would not be guaranteed priority in 
repayment.  Moreover, in an increasingly globalised banking environment, the risks incurred by a multinational bank in one regi on or in a business field could easily spill 
over to its globe-wide branches, and the s upervisory agencies in the host countries 
were not able to isolate local branches from these risks.  However, as a locally 
incorporated subsidiary of a foreign bank was subject to supervisory requirements on 
capital adequacy, loan loss provisions, larg e exposures, cross-border capital flows and 
deposit repayment capacity, the local supervis ory agency could isolate the subsidiary 
from the risks of its parent bank.  And by doing so, the supervisory agency would be 
able to maintain the stability of the dom estic financial system and best safeguard 
depositors’ interests. 
(b) Second, the deposit insurance schemes of many Members covered only locally 
incorporated foreign banks, and not branches of foreign banks.  He added that according to the General Agreement on Trade in Services, Members were allowed to 
protect depositors’ interests and maintain  the soundness and stability of domestic 
financial systems by introducing prudential measures.  According to the Basel 
Committee on Banking Supervision, the banki ng sector regulators of all countries 
were entitled to stipulate and utilize prudentia l regulations to control risks, so as to 
prevent banks from reckless ri sk-taking.  There was a consensus among supervisory 
agencies that the supervisory measures were  considered prudential as long as they 
were intended to protect the depositors’ inte rests, mitigate banking risks, and ensure 
the safe and sound operations of the banking system.  
27. He informed Members that the establishment of a deposit insurance system was still under 
consideration. 
28. The notion that the policy limiting the equity sh are of foreign investors in Chinese banks was 
inconsistent with China’s commitments was simply no t true.  In fact, what China had committed in its 
service schedule was to allow qualified foreign financ ial institutions to establish Chinese-foreign joint 
venture banks without any limitation on the equity shar e.  In practice, foreign financial institutions 
had set up wholly foreign-funded banks with 100 percent foreign shares and Chinese-foreign joint 
venture banks with various equity shares.  Howeve r, the issue of foreign equity participation in 
China’s domestic banks was, by nature, an issue of cross-border merger and acquisitions (M&A), 
which was beyond the scope of China’s WTO accession commitments, and therefore irrelevant for the 
TRM. 
29. Regarding the imposition of working capital requirements on a branch-by-branch basis, he 
explained that by virtue of its commitments at  the WTO, China gradually opened up its banking 
sector.  Therefore, when foreign banks entered Chin a’s market, they faced different choices in terms 
of business scope, RMB business and, hence, the corresponding amount of operating capital.  At 
present, even for individual branches of the same bank, business scopes and clients might differ, thus 
the risks they faced were not necessarily the same.  Therefore, China stipulated different operating 
capital requirement for each individual branch.   S/FIN/M/53 
 Page 5 
 
 
  30. As to whether the working capital requirement s were too high, he stressed that these 
requirements were determined based on the risks that  were specific to branches of foreign banks and 
on the specific situation that Chin a’s supervisory authorities were facing.  Since 2003, the amount of 
operating capital requirements for branches of forei gn-funded banks had been lowered and the tiers 
had been streamlined several times.  
31. Regarding the preparations for the removal of  remaining non-prudential measures for foreign 
financial institutions, he replied that China had recently amended the Regulations on the 
Administration of Foreign-funded Banks and its im plementing rules.  The revised Regulations had 
been promulgated on 11 November 2006.  The Regula tions removed all non-prude ntial restrictions on 
foreign financial institutions.  The main  amendments included the following:  
(a) Geographical and client restrictions on foreign-funded banks conducting local 
currency business had been removed.  Fo reign-funded banks could provide local 
currency business to Chinese citizens within  the territory of China.  All non-
prudential restrictions on foreign -funded banks had been removed. 
(b) Foreign banks were encouraged to establis h locally incorporated subsidiaries or 
transform their existing branches into such  subsidiaries, in line with prudential 
supervision principles and common internati onal practice.  They were thus able to 
engage in all local currency businesses a nd be subject to the same regulatory and 
supervisory criteria as domestic banks. 
(c) A more conducive operating environment for foreign bank branches had been 
created.  These branches were allowed to continue conductin g existing foreign 
exchange business with all kinds of clients, and local currency business with 
corporate clients.  In addition, pursuant to the new Regulations, foreign bank branches in China were allowed to take time deposits of no less than RMB 1 million 
Yuan per deposit from Chinese citizens within the territory of China, in order to 
enlarge their local currency fu nding sources in view of their relatively small number 
of outlets.  Meanwhile, their present ope ration costs and business scopes remained 
unchanged, and in fact they might also ta ke advantage of the streamlined business 
scope categories and reduced working capita l requirements.  Foreign bank branches 
could apply to transform themselves into lo cal subsidiaries at any time based on their 
own business development strategies. 
32. Regarding payment transactions made by bankcar ds and e-payment cards, he explained that:  
(a) Inter-bank clearing service for payment tran sactions made by bankcards belonged to 
the category of clearing service of monetary assets, which should be ascribed to "settlement and clearing service of financial assets, including securities, derivatives and other negotiable instruments."  China had made no commitments on settlement and clearing services in its schedule.  
(b) With regard to international service provi ders of e-payment that made payment 
transaction in China, the Regulations of the People’s Republic of China on Foreign-funded Banks promulgated recently, clearly stated that banking institutions satisfying 
relevant requirements were allowed to provide payment and money transmission 
services including credit card, charge car d and debit card under authorization or 
permission of CBRC.  At present, bank cards  issued by foreign banks outside China 
could be used in China; and bank cards in  RMB and bank cards in foreign currencies 
issued in China could also  be used outside China. S/FIN/M/53 
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  (c) With regard to e-payment cards necessary for international transactions, according to 
China's commitments, banking institutions could issue such cards, including RMB bankcards and those denominated in fore ign currencies, on condition that they 
conformed to the requirements of relevant  laws and regulations as well as related 
standards of the payment service industry. 
33. He finally noted that China had never required all financial institutions that issue payment 
cards in China to adopt the BIN format by China Union Pay for their e-payment cards. 
34. With regard to the Measures for Administering the Release of News and Information in China 
by Foreign News Agencies, he made the following cl arifications.  First, the purpose of the Measures 
was to administer the release of news and inform ation by foreign news agencies. They were not 
especially aimed - as some Members thought - at re gulating foreign financial information providers.  
Secondly, the promulgation of the Measures was a nor mal step to regulate the release of news and 
information by foreign news agencies in China.  It was not intended to impose any restriction on the 
access of financial information provided by fore ign news agencies to China’s market, and the 
Measures were in no way violating China’s mark et access commitments concerning provision of 
financial information services. 
35. He then turned to securities and related services .  With regard to the alleged 49% limitation 
on foreign equity participation in China’s credit reference and analysis, investment and portfolio 
research and advice agencies, he said that in f act China made no commitments in these services. 
36. Regarding the reported moratorium on new secur ities licenses, including for foreign joint 
ventures, he clarified that since the latter half of  2004, against the backdrop of the outburst of long 
cumulated risks in the securiti es sector, the government had begun an overall rectification and 
consolidation of securities firms.  The measure wa s of a prudential nature, and was applied to all 
security firms, whether domestically or foreign-fund ed.  The main task of rectification would be 
basically completed by the end of this year, and the overall objective was expected to be met next year.  He believed that this measure would provi de a better environment for the development of 
China’s securities sector and firms.  
37. He denied the existence of a moratorium  on sales of existing state-owned securities 
companies to foreign entities. 
38. He explained that the capital requirements fo r fund management companies were necessary to 
ensure the normal operation of these companies and to  allow for the necessary level of risk taking.  
China had no plans to change this requirement.  
39. With regard to CSRC's policy for circulati ng proposed measures and providing opportunities 
for public comment, he explained that when the Commission proposed a new measure, it would 
organize different seminars and publish the draft measure at the designated official website and 
newspapers with a view to soliciting public comme nts.  If the proposed measures involved more than 
one regulator, the Commission would coordinate  with other Chinese regulators beforehand. 
40. In China's view, the following issues related to  securities services were not relevant to the 
transitional review process:  the question on economic security assessment for M & A of domestic companies by foreign companies;  the question of  how commercial banks and security firms helped 
China’s domestic institutions and individuals in over seas portfolio investment;  the request to increase 
foreign equity participation in China’s asset ma nagement companies and in securities brokerage 
firms;  and the request to allow security firm s to engage in financial futures business.   S/FIN/M/53 
 Page 7 
 
 
  41. Finally, he turned to other issues .  With regard to the licensing of companies to offer 
enterprise annuities services, he said that in 2005 the Ministry of Labour and Social Security had 
processed 134 applications for licenses from 99 ins titutions, and granted 37 licenses to 29 institutions. 
42. Regarding transparency of laws and regulations , he explained that in June 2002 the State 
Council of China designated "China Foreign Trad e and Economic Cooperatio n Gazette" as China's 
official journal for the purpose of trade policy notif ication and enquiry to th e WTO, and China’s trade 
policy review by the WTO.  The "Gazette", publishe d by MOFCOM, was dedicated to the publication 
of all the laws, regulations and other measures pert aining to, or affecting, trade in goods, and services, 
TRIPS or the control of foreign exchange released  by the NPC, the State Council, and central and 
local governments of China.  The public coul d access China’s economic and trade laws and 
regulations easily and quickly from the "Gazette", the contents of which were available on the website 
of MOFCOM.  In March 2006, the State Council issued a circular which provided that "when 
authorities and local governments publish laws, regulati ons and other measures, or publish their drafts 
for public comment, they must send copies to MOFCOM  for instantaneous publishing in the Gazette". 
43. The representative of Japan  encouraged China to make efforts to ensure regulatory 
transparency.  He believed that implementing WT O commitments and ensuring transparency were 
equally important for China to reap the benefits of liberalization.  He then referred to China's 
explanation concerning the reinsura nce regulations, of which he was not yet fully convinced.  The 
regulations restricted marketing of reinsurance, wh ich consequently affected cross-border reinsurance 
transactions.  In his view, marketing was one of the important elements of the 'supply of a service' as 
defined in Article XXVIII of the GATS.  He e xpressed the wish to continue discussing the matter 
with China, and requested that China expl ained the purpose of the said regulations. 
44. The representative of the European Communities  wanted to raise some follow-up questions in 
light of recent developments, including the promul gation of a new law on foreign-funded financial 
institutions and new administrative measures on the release of news and fi nancial information in 
China.  He considered, nevertheless, that there ha d been some progress in China with regard to the 
implementation of GATS commitments in the financial services sector, and this was very positive.  At 
the same time, foreign presence in China's financ ial sector remained limited, below 2 per cent.  
45. He noted, however, that there had been some steps in the wrong direction.  One of them 
concerned the release of news and financial inform ation in China, and the measures that had been 
promulgated by Xinhua News Agency on 10 September 2006.  He had heard the Chinese 
representative say that these measures would not impose any restriction on access and supply of 
financial information services into the Chinese market .  However, he still had a number of concerns.  
According to the measures, it was no longer possible to directly supply these services to the Chinese 
market.  Rather, a supplier had to go through a distributor designated by Xinhua News Agency, and only one distributor had been designated to date, an d it was a part of Xinhua – the CEIS.  Another 
concern related not only to this distributor, bu t to a regulatory arm of Xinhua – the Foreign 
Information Administration Centre or FIAC – which was also part of Xinhua.  Therefore, the 
European Communities had some concerns regardi ng the independence of the regulator, which was a 
commitment that China had undertaken.  He had not heard any clarifications from the Chinese 
representative on those issues.  He had a few follow- up questions on this sector.  Starting with Xinhua 
News Agency, he asked how many non-representati ve offices had been established in China for the 
supply and release of financial information service s.  It was his understanding that there were a 
number of representative offices already established, but it was not clear whether it had been possible 
to establish other forms of commercial presence for th e supply of these services in China.  A second 
question was related to the possibility of designa ting a distributor for the supply of financial 
information services, as foreseen in Article 7 of the Administrative Measures on the Release of News 
and Financial Information.  He asked whether a fo reign entity could become a designated distributor 
by Xinhua, and what conditions were attached to that.   S/FIN/M/53 
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  46. He then moved on to banking and the new regul ation on foreign funded financial institutions 
promulgated on 11 November 2006, and asked when  the implementing rules would be adopted.  
Another question related to requireme nts that were imposed on branches.  At present, a branch needed 
to prove three years of experience, and two consecutive years must be profitable.  His understanding was that this requirement would be relaxed for cer tain regions in China under the new regulations for 
foreign-funded financial institutions, and that the three-year requirement would be changed into a 
two-year requirement.  Since according to the Ch inese representative, this was a prudential measure, 
he wondered how it was possible to relax a prude ntial measure for economic development purposes 
and to allow foreign entities to establish in certain parts of China.  
47. Regarding insurance services, he had heard the Chinese representative say that there was 
equal treatment for licence applications from fore ign and Chinese insurance companies.  He asked, 
however, whether it was possible for a foreign insura nce company that wished to apply for a licence 
to branch or sub-branch, to apply concurren tly for those licences or only consecutively.   
48. The representative of the United States
 said that his country placed great importance on the 
transitional review mechanism for China, which gave Members the opportunity to assess the progress 
made by China in adopting and complying with WTO disciplines.  He asked some questions which, in 
his view, had not been addressed in the statement ma de the Chinese representative.  He saw a need to 
add clarity to the regulations on reinsurance, whic h were extremely confusing to the private sector.  
There was great uncertainty, however, as to what was meant by providing priority offers that did not 
require actual provision of contract s to domestic reinsurers.  This was creating problems in marketing 
as well.  It was not clear how these measures could be implemented in a manner consistent with 
China's market access commitments in this area.  
49. He also expressed concern about the regula tions promulgated on 11 September 2006 with 
respect to financial information services.  He request ed further clarification, including on how these 
measures could be implemented in a way consistent with China's market access and national treatment 
obligations, since they did not appear to apply to domestic financial information providers.  It was 
also important to clarify how measures might be  implemented in a manner consistent with the 
horizontal acquired-rights commitment made by Ch ina in its schedule, as foreign financial 
information providers enjoyed full market acc ess in the sector under the 1996 regulations.   
50. He also raised some questions regarding the ne w banking regulations.  First, he sought further 
clarification regarding the requirement to incor porate locally since this reservation had not been 
included in China's services schedule.  Secondly, he asked when the implementing rules would be 
available for review.  
51. Other issues did not seem to have been addressed  by the Chinese representative's statement.  
The issue of concurrent versus consecutive bran ch approvals for foreign insurers operating as 
branches, in comparison with domestic Chinese insure rs, continued to be a cause for concern.  No 
examples were available of foreign insurers bei ng provided approvals for c oncurrent applications, 
while, it was possible on a regular basis for domestic in surers to receive concurrent branch approvals.  
He noted the assurances by the Chinese authorities th at there was no difference in treatment with 
respect to these applications, but the decisions of the CIRC did not seem to be consistent with that 
statement.  He further asked how CIRC actions in th is area could be made more consistent with the 
national treatment obligation. 
52. With regard to the conversion from foreign bran ches into subsidiaries in  the insurance sector, 
foreign insurers that had applied to become subsidia ries had been subject to very significant delays in 
the review of their applications.  In some cases, the delay was more than one year, and no US firms 
had been authorized yet to convert from a branch to  subsidiary.  He was particularly concerned with 
the remark by the Chinese representativ e that the ability for insurers to sub-branch was available only  S/FIN/M/53 
 Page 9 
 
 
  for those insurers that had incorporated in China as local corporations.  In his view, that policy was 
inconsistent with China's commitments to allow freedom of means of entry.  
53. Regarding capital requirements for insurance, he  said that CIRC required registered capital 
for each sub-branch of those firms that were operating as branches, and for each new location of those firms operating as subsidiaries.  The United States had requested an explanation of the prudential 
basis for these requirements, and asked whether it wo uld be possible for the CIRC to rely on financial 
reserves of the parent company for those establis hing as a branch in China, and of the initial 
subsidiary for those establishing as a subsidiary.  He reiterated those questions, since they had not 
been addressed yet by the Chinese representative. 
54. Regarding new product approvals in the insuran ce sector, he said that a foreign insurer had 
sought approval from the CIRC to supply political risk insurance, but had experienced a long delay in 
its application.  Such insurance was currently be ing provided in the Chinese market by a state-owned 
company.  He was at a loss to understand why this new product, which was in fact an existing product 
in the Chinese market, was not approved by CIRC, a nd wondered whether this was consistent with the 
national treatment obligation. 
55. A few questions had been raised by the United Stat es about investment of assets by insurers.  
The CIRC had set a very high threshold of total a ssets required for investme nt of foreign exchange 
assets overseas.  This threshold effectively barre d any foreign company operating in China from 
participating in these opportunities in overseas market s.  He asked, again, how this was consistent 
with China's national treatment obligations. 
56. Turning to asset management, he said that the 2004 regulations required that companies must 
have had licenses to operate in China for more than  8 years prior to being able to establish an asset 
management company.  That requirement exclude d all foreign companies that had entered the 
Chinese insurance market si nce China's WTO accession in 2001.  Ho w could this be consistent with 
the national treatment principle?   
57. He then turned again to banking and related services.  In addition to the questions on 
incorporation requirements, he said that the new re gulations appeared to ba r foreign banks operating 
as branches from providing RMB services, including lending to Chinese individuals.  He appreciated 
the clarification given by the Chinese representative that these banks were able to take time deposits 
about the one-million yuan threshold, and continue d to provide RMB lending to corporations.  He 
asked, nevertheless, why these foreign banks were  barred from providing these services, including 
lending services, to Chinese individuals; and whet her this was consistent with the Chinese 
commitment to lift the various limitations on market access in the banking sector.  
58. In the case of electronic payments, money transmission, and credit cards, it was the US' 
understanding that China had committed to allow un restricted market access and national treatment 
for payments and money transmission services, including credit, debit and charge cards by 11 December 2006.  He asked about China's plans to implement these commitments in time, and what 
steps would be taken to allow foreign providers of electronic payments, money transmission, and 
credit card services to enter the domestic market and process domestic RMB transactions.  It was the US' expectation that as of 11 December 2006 forei gn providers would be able to issue single brand 
cards, and provide domestic credit cards to the Chinese market and Chinese consumers.  
59. Regarding the sale of state-owned securities firms to foreign investors, he appreciated the 
confirmation by the Chinese representative that th ere was no prohibition.  The US looked forward to 
the opportunities for foreign firms to take advantage of an open market.  S/FIN/M/53 
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  60. He also appreciated the clarification regardi ng the issuance of new securities licences.  
However, was this consistent with the national treatment obligations?  Given the very limited 
presence of foreign firms in the market, the prohibition on issuing new licences would have a particularly severe impact on foreign providers.  He  also asked when new licences would be issued to 
securities firms. 
61. He appreciated the information given with rega rd to progress made in both the applications 
and approvals for firms to provide enterprise annuiti es services.  He would be interested in getting 
more information about the nature of the licensi ng requirements since there was some uncertainty 
among firms in the industry as to how they could ta ke advantage of this new and important area of 
business.  He recalled that the United States had al so raised questions about the provision of group 
health insurance, and would be interested in obt aining more information a bout the progress made in 
that area.  
62. Finally, he stressed the importance of making fu rther efforts in the area of transparency.  
Although a challenge for all Members, transparen cy was very important for smooth regulatory 
oversight and for the development of the private sector.  It was important to have a transparent 
process of legal and regulatory de velopment, and to have a full and predictable process for prior 
public comment and review.  He appreciated the act ion plan adopted by the State Council in March 
2006 to require all central, provincia l and local governments to provide  all trade-related measures to 
the MOFCOM Gazette.  That was very important, given the previous gap in China's legal and 
regulatory regime.  He would be interested to hear more about the implementation of this.  
63. The representative of Canada
 recognized China's efforts to bring its trade policies into 
conformity with its accession commitments.  Furt her reforms would help ensure that China fully 
meets the letter and spirit of its commitments.  He then  turned to some areas of particular interest to 
Canada.  As highlighted in Canada's submission l ast year, there were still questions about China's 
commitments to permit branch expansion of insu rance firms consistently with the phase-out of 
geographic restrictions, the last of which was to be  removed in 2004.  It appeared that new branch 
approvals for domestic insurance firms continued to proceed more expeditiously than those of foreign 
invested insurers.  
64. He also expressed interest in obtaining further information on how China's recent regulations 
on reinsurance services worked.  He asked how restricti ons on the ability of fore ign insurers to engage 
in reinsurance with their affiliates were consis tent with China's commitments in this sector.  
65. Finally, he turned to financial information ser vices.  He welcomed the statement that China 
sought to rationalize the relationship between the measures on news agency services adopted on 10 
September 2006 and China's GATS commitments.  Howeve r, Canada continued to share the concerns 
raised by the European Communities in this area. 
66. The representative of Australia  noted that since his country's submission for the this TRM, 
China had promulgated the administrative regulati ons on foreign-funded banks, which contained a 
range of new measures affecting fore ign invested banks in China.  He  would continue to seek further 
clarification on how the new regulations would affect  the issues raised in Australia's questions.  He 
then turned to the issue of tran sparency, and said that in order to avoid unintended consequences, 
Australia strongly encouraged China to consult more  widely and deeply with Members, and to allow 
more time to consider the views of Members prior to the implementation of significant new measures such as this one affecting foreign banks in China. 
67. The representative of China
 said that trade in services was a very complex field. It took eight 
years to negotiate the GATS and, still, some very im portant areas had been left unfinished, such as 
government procurement, subsidies and safeguards.  On the other hand, China had faced a tremendous  S/FIN/M/53 
 Page 11 
 
 
  task in only five years.  China was also confronted with restric tions in other markets, which were in 
sharp contrast with China's liberalization efforts.  The comments made by Members could be classified, in his view, into two groups.  On the one  hand, those seeking further clarification on some 
important aspects;  and, on the other hand, those expressing concerns, and maybe dissatisfaction, with 
delays in approvals or some lack of transparency.  Regarding the latter, he considered that the delays 
in accepting the Fifth Protocol to the GATS, a ddressed under item B of the agenda for today's 
meeting, were actually more important that the dela ys that might have been faced in China.  These 
alleged incidents were not intentional, and could not even be called delays.  Every Member had the 
right to regulate services industries, and to adopt prudential measures regarding approval.  
68. He indicated that the implementing rules re garding the regulation on foreign-funded banks 
had been promulgated on 28 Novemb er 2006 and confirmed that forei gn banks could lend to Chinese 
individuals.  Authorization for the establishment of  a foreign information administrative centre was 
given by the State Council.  This centre was indepe ndent and was not going to  provide an advantage 
to Xinhua.  
69. He finally said that interested Members could m eet bilaterally with his delegation to discuss 
further some of the issues, although not all of them .  Many question would need to be taken back to 
capital.  He noted that this offer was a sign of flex ibility on China's part, and that the review should be 
considered completed after this meeting.  
70. The representative of the United States
 made an additional comment on the regulations 
affecting mergers and acquisitions.  He unders tood from the initial statement by the Chinese 
representative that this was not viewed as relevant for discussions under the TRM.  He took issue with 
that because the broad criteria for reviewing cro ss-border mergers and acquisitions (such as national 
economic security, protection of na tional brands, and a variety of other criteria) could potentially 
create significant market access barriers in services, depending on how they would be implemented.  He encouraged China to consider the questi ons posed by some Members on this issue.  
71. The representative of th e European Communities
 noted that many of the questions raised had 
not been addressed by China at this meeting.  He  encouraged China to respond and accepted the offer 
to have further contacts with interested Members.   
72. 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 that:  
(a) pursuant to section 18 of the Protocol on the Accession of the People's Republic of 
China, the Committee had conducted a review of the implementation by China of the 
WTO Agreement and of related provisions of the said Protocol, in the meeting held 
on 27 November 2006;  
(b) written communications had been received  from five Members, namely Japan, the 
European Communities, the United St ates, Australia, and Canada;  and 
(c) the details of the discussion, including a ll the interventions made at the meeting, 
 would be found in the meeting report, to be issued as document S/FIN/M/53. 
73. The Committee so decided .  S/FIN/M/53 
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  F. D
ATE OF THE NEXT MEETING  
74. The Committee agreed  to hold its next meeting during the first quarter of next year.  The 
exact date would be announced in due course.   
G. OTHER BUSINESS  
75. There was no issue raised under this agenda item. 
__________