. /.  RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/56 
22 November 2006 
 (06-5606) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM CANADA 
 
Transitional Review Mechanism Pursuant to Paragraph 18 of the Protocol of 
 
Accession of the People's Republic of China ("China")  
 
 
 The following communication, dated 20 Nove mber 2006, from the delegation of Canada is 
being circulated to the Members of the Committee on Trade in Financial Services. 
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1. Canada welcomes China's continued progress in implementing its WTO commitments for 
financial services, and recognizes the value of  the TRM process as a vehicle for exchanging 
information on financial sector po licy and regulatory issues. In acco rdance with pa ragraph 18 of 
China's accession protocol, and in the interest of  promoting a constructive dialogue, Canada requests 
that China provide responses and relevant info rmation concerning the following questions and 
comments during the meeting of the Committee on Trade in Financial Services to be held on 
27 November 2006. 
A. INSURANCE  
2. As per China's GATS Schedule of Specific Co mmitments, branch expansion of insurance 
firms is to be permitted, consistent with the phase out of geographic restrictions (the last of which 
were removed in December 2004).  Canada notes th at Chinese insurance firm s still appear to be 
receiving preferential treatment via concurrent bran ch approvals, while foreign-invested insurers 
continue to be limited to consecutive branch a pprovals.  Could China please indicate how foreign-
invested insurers are provided national treatment with respect to licensing? 
3. According to the "Regulations on the Administra tion of the Reinsurance Business" issued by 
the China Insurance Regulatory Commission (CIRC), in surers must seek reinsurance offers from no 
fewer than two reinsurance companies in China accounting for a minimum of 50 per cent of the 
insurance to be ceded.  As well, Article 22 of th e regulations indicates that foreign insurers are 
prevented from engaging in reinsurance with their af filiates.  Please explain how these regulations are 
consistent with China's WTO commitments given that China has not scheduled any limitations on 
cross-border trade in reinsurance. 
4. The "Provisional Measures Governing Insurance Assets Management Companies" 
promulgated by the CIRC indicate that, in order to establish an insurance asset management company, 
at least one of the shareholders or founders mu st be an insurance comp any or insurance holding 
company that meets the criteria set out in Article  8 of the regulations.  Among these criteria are 
requirements that the insurer has been engaged in  the insurance business for no less than 8 years and 
meets certain minimum net and total asset levels.  Given that these requirements do not take into 
account the aggregate size of foreign insurers and their experience in risk management abroad, the 
regulations appear to favour domestic insurers at  the expense of foreign insurers operating in the 
Chinese market.  Could China please explain how these measures are in ac cordance with China's 
GATS Schedule of Specific Commitments? S/FIN/W/56 
Page 2  
 
  B. B
ANKING  
5. During the 2005 Transitional Review in the CTFS,  China commented that, in the future, it 
would consider how to apply working capital requi rements to the overall commercial presence of a 
foreign bank in China.  Has China established a time line for reviewing its capital requirements with a 
view to moving towards a consolidated approach for foreign banks?  
6. In Canada's 2005 TRM submission (S/FIN/W/50) , Canada outlined its continuing concerns 
with the Procedures on the Administration of Foreign De bts of Foreign Capital Banks in the Territory  
issued on by the National Development and Refo rm Commission (NDRC), the People's Bank of 
China (PBOC) and the China Banking Regulat ory Commission (CBRC) on 27 May 2004, and the 
implementing rules released by the State Administ ration of Foreign Exchan ge (SAFE) on 21 June 
2004.  These regulations highlight limitations on th e amount of foreign exchange funding foreign 
banks may acquire from abroad through the imposition of a quota system.  In Canada's view, these 
quotas artificially cap the extent to which foreign banks' foreign currency le nding can be financed 
offshore, and appear to contravene GATS Article XVI,  paragraphs 2(b) and (c).  China has previously 
noted that it would undertake a review of these regulations.  Could China please indicate whether a 
timeframe has been set for reviewing this rule?     
C. FINANCIAL INFORMATION SERVICES  
7. According to the "Measures for Administering the Release of News and Information in China 
by Foreign News Agencies" issued by Xinhua Ne ws Agency on 10 September 2006, foreign news 
agencies, inter alia , are now subject to approval by Xinh ua News Agency, must have entities 
designated by Xinhua News Agency act as their agents, and are prohibited from directly soliciting 
subscriptions to their news and information servi ces in China.  Given that China has taken full 
national treatment commitments under banking sub-sect or (k) -provision and transfer of financial 
information, and financial data processing and re lated software by supplie rs of other financial 
services- could China please indicate how the aboveme ntioned measures are consistent with China's 
GATS Schedule of Specific Commitments? 
D. G ENERAL  
8. Canada recognizes the earnest efforts made by China to increase regulatory transparency in its 
financial services sector.  However, further improveme nts to China's transparency practices, such as 
providing financial service suppliers with suffici ent notice prior to the introduction of regulatory 
changes and reporting requirements, would increase the predictability of China's financial sector 
regulatory environment and reduce undue costs incu rred by service suppliers operating in the sector. 
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