RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/68 
27 November 2008 
 (08-5819) 
Committee on Trade in Financial Services Original: English 
  
 
COMMUNICATION FROM THE UNITED STATES 
 
Transitional Review Mechanism Pu rsuant to Paragraph 18 of 
 
the Protocol of the Accession of the People's Republic of China ("China")   
 
 
 The following communication, dated 24 November 2008, from the delegation of the United States, is being circulated to the Members of  the Committee on Trade in Financial Services. 
 
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Questions from the United States to China concerning Financial Services
 
  
I. INSURANCE SERVICES 
1. The United States remains concerned that the China Insurance Regulatory Commission 
(CIRC) in practice does not consistently meet  its own regulatory deadlines for reviewing and 
approving internal branch applications that it receives from foreign companies, including for 
applications for consecutive (i.e., one at a time) br anches.  The United States is also concerned that 
foreign life and non-life insurance subsidiaries est ablished in China may not  apply for and receive 
multiple, concurrent approvals to e xpand through internal branches.   Under current practice, foreign 
life and non-life insurance subsidiaries may only appl y for and obtain consecutive approvals.  This 
practice is inconsistent with China’s own re gulations, which allow for multiple, concurrent 
applications and approvals.  In contrast, establis hed and start-up Chinese insurers may apply for and 
do receive multiple, concurrent approva ls to establish internal branches. 
(a) Please explain how China justifies any such delays or different tr eatment in light of 
China’s WTO national treatment commitments.   
(b) Can China confirm that it will fully implement its own regulations regarding internal 
branching both in regard to consecutiv e or concurrent br anch applications? 
2. CIRC’s Gazette No. 75 of 17 September 2008 im poses a moratorium on the approval of sales 
offices of insurance companies.  The United States understands that the moratorium relates to CIRC’s 
perceived need to strengthen the s upervision of these sales offices, and that the moratorium will be 
imposed on all companies (i.e., domestic and forei gn) on a temporary basis.  Could China please 
confirm that CIRC will lift the moratorium as  quickly as possible and will ensure that any 
replacement regulations do not discriminate against foreign companies?  
3. Non-life insurance companies have not been able to obtain approval to supply political risk 
insurance.  Can China confirm that CIRC w ill meet China’s WTO commitments by approving 
applications from non-life insurance companies to supply political risk insurance?   
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  4. The United States seeks the following clarificati ons from China regarding the operations of 
China Post as a provider or distributor of insu rance services and its anticipated treatment under 
Chinese law in comparison with other suppliers of insurance services.    
(a) The United States understands that China Post has been approved by CIRC to set up a 
life insurance entity that will be known as China Post Life Insurance Company 
Limited. Is that correct?   
(b) The United States understands that CIRC is  the primary regulator of the new China 
Post insurance entity.  Is that correct?  W ill China’s State Postal Bureau or any other 
body have any additiona l regulatory oversight for the new entity? 
(c) Can China confirm that its regulatory authorities will apply the same regulatory 
requirements to the new China Post insura nce entity as to any other supplier of 
insurance?   
(d) The United States understands that the new China Post insurance entity would mainly 
target farmers and low-income urban residents as customers.  Is that correct?  
(e) The United States understands that the ne w China Post insurance entity has invited 
private companies (including possibly foreign companies) to distribute their products through the China Post insurance netw ork.  Can China please confirm this 
understanding?  What procedures should a private company follow if it is interested in this distribution possibility? 
5. The United States appreciates that the National People’s Congress is in the process of 
reviewing a draft of the Insurance Law and, in Se ptember 2008, made the draft law available on its 
website for public comment.  The United States notes that several insurance trade associations have 
provided detailed comments on the draft law, including on issues of disclosure, foreign insurance institutions, bankruptcy and insolvency, scope of supe rvisory discretion, the insurance association of 
China, insurance group companies and certain technical issues.   
(a)  Can China confirm that CIRC is willi ng to work closely with appropriate NPC 
committees to ensure that the industry comments are given due consideration? 
(b) The United States understands that the draft law is intended to ensure that China does 
not impose restrictions on reinsurance compan ies located in China that seek to source 
reinsurance from companies located outside of  China. In order to avoid any lack of 
clarity, could China consider undertaking any drafting necessary to clarify that 
discriminatory provisions in CIRC’s 2005 Regulations on the Administration of 
Insurance Business  have been superseded? 
6. Article 18 of CIRC’s Measures on  Administration of Chinese Representative Offices of 
Foreign Insurance Institutions  imposes a number of onerous re quirements on general and chief 
representatives of foreign insurers.  These representa tives are required to be principally stationed at 
their offices, to spend a minimum of 240 days in Ch ina, not to absent themsel ves from China for more 
than 30 days at a time, and to submit a report to CIRC and designate a substitute whenever they are absent for more than 14 days.  Can China furthe r clarify why these requirements are needed for 
prudential reasons?  
7. The United States understands that CIRC has recently released an “executive training rule” 
that would require senior executives of insurance co mpanies, including those based in other countries, 
to spend weeks in training that does not seem  to have any bearing on their professional  S/FIN/W/68 
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  responsibilities.  What is the rationale for this rule ?   Will China consider more flexible procedures, 
including credit for professional experience or certification? 
8. Under the terms of China’s accession to the WTO, foreign insurance companies operating in 
China at the time of China’s WTO accession have the right to continue to operate under the conditions 
and approvals existing at that time.  Can China confirm that these companies are not required to 
comply with more recently issued regulations, im plementing rules and other measures, including with 
regard to form of establishment, operations, financ ial structure and capital, to the extent that these 
measures would alter the conditions and approvals under which these comp anies have been operating?  
If not, please explain how this treatment is c onsistent with China’s WTO obligations.  
II. BANKING AND RELATED SERVICES 
9. In the GATS Schedule accompanying its Protocol of Accession, China committed to 
eliminate national treatment and market access limita tions, including geographical, client and scope of 
business limitations, for foreign financial institutio ns providing banking services within five years 
after China’s accession, or by 11 December 2006, rega rdless of whether these institutions operated as 
branches or subsidiaries.  However, China appears to apply more restrictive requirements to foreign 
banks that operate in China through branches rather than subsidiaries.  
(a) The United States understands that, under the Regulations on the Administration of 
Foreign-funded Banks , branches of foreign banks in China may only accept retail 
deposits in excess of RMB 1 million.  China did not provide a detailed answer to the 
following U.S. question from last year’s tr ansitional review before this Committee:  
As China develops its deposit insurance syst em, is China considering adjusting this 
threshold to the level being considered fo r coverage by deposit insurance?  The 
United States asks that China respond to this question in connection with this year’s transitional review. 
(b) China also did not provide a detailed answer  to the following U.S. question from last 
year’s transitional review before this Committee:  Please also clarify how CBRC’s 
regulations would affect retail lending from  foreign branches and how that would be 
consistent with China’s GATS Schedule af ter 11 December 2006, given that China 
was required to phase out any limitations on scope of business. The United States asks that China respond to this question in connection with this year’s transitional 
review. 
10. China’s GATS Schedule provides that “foreign financial institutions who meet the following 
conditions are permitted to establish a Chinese-forei gn joint bank or a Chinese-foreign joint finance 
company in China:  total assets of more than US $10 billion at the end of the year prior to filing the 
application.”  There is no inclusion of a limitation on the equity share allowed to a foreign investor or 
on the number of banks in which a foreign investor can  invest.   However, China currently maintains a 
policy limiting the equity share of a single foreign in vestor in an existing Chinese-invested bank to 20 
percent, with the proviso that the equity share of  total foreign investment must be lower than 25 
percent.  Moreover, China further limits this type of investment to no more than two existing Chinese-
invested banks for any given foreign investor.  Du ring last year’s transitional review before this 
Committee, China claimed that there is no restriction on the equity of foreign investment in a Chinese 
banking institution and the 25 percent cap was not a cap on foreign share but rather a criterion to 
determine the nature of a financial institution (i.e ., whether a  “Chinese bank” or a “ joint venture 
bank”).   China went on to claim that foreign inv estment in Chinese-funded institutions did not relate 
to China’s specific commitments.    S/FIN/W/68 
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  (a) Can China confirm that its policy has been  changed and that foreign investment in a 
listed or non-listed Chinese bank can exceed 25 percent?  
(b) If not, what actions will China take rega rding the above-described equity limitations 
to ensure its policy is in conf ormity with its GATS commitments? 
(c) Have there been any transactions in wh ich the above-described equity limitations 
have been exceeded?  If so, please describe them.  
11. At last year’s transitional review before this Committee, on the issue of capital requirements 
for foreign bank branches, China noted that it im poses different operating capital requirements based 
on that branch’s form of organization and business scope and the status of China’s supervision and 
regulation.  The United States takes note of Ch ina’s reduction of capital requirements for bank 
branches but continues to be concerned that add itional capital requirements on internal branches are 
high and imposed in a non-transparent manner.   
(a) Are the criteria for calculating branch capital requirements the same for domestic and 
foreign-affiliated institutions?  Please explain. 
(b) What is the status of the review of these capital requirements by CBRC? 
12. In the GATS Schedule accompanying its Prot ocol of Accession, China committed to allow 
unrestricted market access and national treatment for “payments and money transmission services, including credit, charge, and debit cards,” with this  commitment becoming effective with regard to the 
RMB business of retail clients no later than 11 December 2006.  China also committed to allow 
unrestricted market access and national treatment fo r “advisory, intermediation, and other auxiliary 
financial services” for other financial service s listed in its schedule, including payments.  
China’s GATS Schedule further provides for open market access for the “provision and transfer of 
financial information, and financia l data processing by supplier[s] of other financial services.”  During 
recent transitional reviews before this Committee, China seemed to suggest that electronic payment 
services and related services were “settlement and clearing services for financial assets” and noted that China did not have GATS commitments in this area.  China will be aware that other Members, 
based on their general understandi ng of the definitions contained in the GATS Annex on Financial 
Services, do not share China’s view of the relevanc e of “settlement and clearing services for financial 
assets,” which relate to issues such as securities settlement, to Member s’ concerns relating to China’s 
policies regarding electronic payment services. 
(a) How will China ensure that foreign electronic payment providers can process 
electronic payment transactions in China? 
(b) How will China ensure that foreign financ ial institutions can issue the payment cards 
of their choice (whether Chinese-, foreign- or  co-branded) for domestic transactions?   
III. SECURITIES AND RELATED SERVICES 
13. The United States notes that in the past year the China Secur ities Regulatory Commission 
(CSRC) issued regulations lifting its moratori um on sales of existing state-owned securities 
companies to foreign entities and on providing ne w securities licenses, including for foreign joint 
ventures.    However, the United States remains concerned that China has moved very slowly to 
restore this access in practice.  Can China provi de an update on how many new foreign firms have 
been granted licenses since the lifting of the moratorium?    S/FIN/W/68 
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  IV. PENSIONS  
14. The United States is concerned that Chin a’s licensing system for “enterprise annuities” 
services, overseen by the Ministry of Human Resources and Social Services (MOHRSS), is closed.  The United States urges China to re-open its ente rprise annuities licensing system and to remove 
quotas to enable all qualified firms to obtain licenses to provide enterprise annuities services. 
(a) Please confirm that China will maintain a level playing field among domestic and 
foreign banks, securities firms, asset management companies and insurers in the enterprise annuities services application and approval process.  
(b) Please confirm that review by functional regulators (i.e., CIRC, CBRC and CSRC) 
will not hold up an application under MOHRSS licensing procedures.  
(c) Please confirm that MOHRSS licensing procedures will enable foreign and domestic 
companies to apply and be approved for a license covering an integrated package of 
enterprise annuities services.  
V. TRANSPARENCY 
15. The United States appreciates China’s recen t decision to publish in advance for public 
comment, subject to specified exceptions, all trad e and economic-related administrative regulations 
and departmental rules that are proposed for adopti on and provide a public comment period of not less 
than 30 days from the date of publication.  China indicated that it would publish these proposed 
measures on a single Chinese Government website mainta ined by the Legislative Affairs Office of the 
State Council. Can China explain how this new syst em is operating in pr actice with regard to 
proposed measures that relate to financial servi ces, including proposed measures from each of the 
following agencies:  CIRC, CBRC, CSRC and MOHRSS? 
 16. Please describe CSRC’s policy with regard to circulating proposed measures and providing 
opportunities for public comment.  Some recent pr oposed measures have only allowed periods as 
short as 7 or 14 days (rather than 30 days) for co mment, which is insufficient to allow interested 
parties to thoroughly review and comment.  Please  also explain how CSRC coordinates with other 
Chinese agencies when proposed measures invol ve more than one regulatory agency. 
 
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