. /. RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/50 
20 September 2005 
 
 (05-4146) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM CANADA 
 
Transitional Review Mechanism in connection with Paragraph 18 of 
 
the Protocol on the Accession of the People's Republic of China  
 
 
 The following communication, dated 19 Sept ember 2005, from the dele gation of Canada is 
being circulated to the Members of the Committee on Trade in Financial Services. 
  
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Canada recognizes China’s efforts of the past year to continue implementing its WTO 
commitments for financial services, and reiterates its support for the Transitional Review Mechanism 
and the useful information exchange it promotes.   In accordance with paragraph 18 of China’s 
accession protocol, and in order to contribute to an  informed discussion, Canada requests that China 
provide responses and relevant information concer ning the following questions and comments during 
the next meeting of the Committee on Trade in Financial Services. 
Questions and Comments 
A. INSURANCE  
1. Multiple Branch Applications and Approvals:   While China committed to provide National 
Treatment with respect to the licensing of branch  operations, Canada notes that Chinese insurance 
firms (including new companies with little or no operational experience) continue to receive 
preferential treatment with respect to the ability to open multiple branches in different regions at one 
time.  In contrast, the general rule observed for foreign-invested joint ventures is that the China 
Insurance Regulatory Commission (CIRC) will only process a new application for a branch office 
after a previously approved branch has commen ced operations.  Can China please comment on how it 
intends to ensure National Treatment for foreign-in vested insurance joint ve ntures with respect to 
licensing, given that the current treatment does not  appear to be consistent with China’s GATS 
commitments? 
2. Sales Offices Applications and Approvals:   O n  2nd September 2003, the CIRC issued a 
“Notice in relation to Issues Concerning the Opera tional Regions of Insurance Companies (No, 120 of 
2003)”.  Canada understands that according to this no tice, if an insurance company has a branch or 
subsidiary in a province, a self-autonomous area or a municipality directly under the Central 
Government, the insurance company has a right to extend its business in said area via sales servicing offices or insurance intermediary companies.   
As well, according to the “Administrative Meas ures for Sales Servicing Offices of Insurance 
Companies” (‘Administrative Measures’) issued by the CIRC on 1
st February 2002, from the date it 
decides to process an application for a new sales servicing office, CIRC has 20 working days to S/FIN/W/50 
Page 2  
 
determine whether or not to grant the approval.  However, the Administrative Measures do not specify 
a maximum timeframe between when the CIRC receiv es a complete application and when it decides 
to process it, which can lead to significant delays.  
In practice, the applications to establish sales servicing offices within a given jurisdiction are 
processed by the local CIRC offices, and Canada understands that the degr ee of implementation and 
compliance to the ‘Administrative Measures’ varies be tween those local offices.  The outcome of this 
has been that in certain provinces, foreign-inve sted insurance joint ventures have experienced 
significant delays in the processing of sales servicing office applications, and some local CIRC bureaus do not allow concurrent approval of multiple sales servicing offices.   
Can China please provide an overview of the effort s it is making to ensure local office compliance 
with China’s WTO commitments for National Treatment and Market Access? 
B. B
ANKING  
3. Canada highlighted in our 2004 submissi on (S/FIN/W/37) its concerns with the Procedures 
on the Administration of Foreign Debts of Foreign Capital Banks in the Territory  issued on 
27 May 2004 by the National Development and Re form Commission (NDRC), the People’s Bank of 
China (PBOC) and the China Banking Regulat ory Commission (CBRC), as well as further 
implementing rules released on June 21st by the State Administration of Foreign Exchange (SAFE), 
which outline limitations on the amount of foreign exchange funding foreign banks may acquire from 
abroad through the imposition of a quota system.  Canada’s experience is that these regulations 
artificially cap the extent to which foreign banks’ foreign currency lending can be financed offshore, 
and in practice limit the size of the loan portfolio s of many foreign bank branches.  This appears 
counter to GATS Article XVI, paragraphs 2 (b) an d (c).  Can China please indicate how this quota 
system is consistent with its GATS commitments, or how it intends to provide greater flexibility in the 
setting of individual quotas? 
4. China stated during its 2004 Transitional Review  in the CTFS that it intends to review its 
minimum capital requirements for foreign banks with  a view to relaxing them in the future.  Can 
China please provide an update regarding its thinking  in this area?  Does China expect to reduce the 
capital burden on foreign bank branches in the near future, given the financial support they already 
enjoy from their parent and their now more well-established track records? 
C. GENERAL  
5. The unexpected revision of regulations and reporting requirements can impose undue costs 
and burdens on financial instituti ons.  While Canada recognizes the improvements made in regulatory 
transparency, Canada encourages Chinese regulators to maintain an open dialogue with financial 
service providers to enable a better understanding a nd expectations of the service providers’ reporting 
obligations and operating environment, including regarding possible changes in the future. 
6. While China has made great progress in opening its financial sector in line with (and 
sometimes ahead of) its GATS commitments, foreign financial services provide rs continue to face 
delays and lengthy approval procedures for such thin gs as new branch locations and product licenses.  
When viewed along with recent CBRC comments that it will seek to manage foreign bank expansion 
in China beyond 2006, this raises the fear that fore ign operators will continue to face undue barriers 
even though markets are technically open to foreign competition.  Can China please provide information regarding its efforts to ensure the effi ciency and predictability of application procedures 
and foreign financial service provider regulation, in particular with respect to the application of 
published laws and regulations by regulatory officials? 
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