. /. RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/49 
14 September 2005 
 
 (05-3998) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM AUSTRALIA 
 
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 12 Septem ber 2005, from the delegation of Australia is 
being circulated to the Members of the Committee on Trade in Financial Services. 
 
 
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1. Australia acknowledges China’s continuing effo rts to implement its WTO commitments for 
financial services.  Australia recognises that Ch ina’s accession to the WTO and its own economic 
reform program have instigated a welcome process of liberalisation with a view to greater access for foreign firms across the financial services sector.  The competitive stimulus and enhanced efficiency 
flowing from opening the financial services sector to  greater foreign participation, coupled with 
strengthened regulation and supervision will be an important driving force in the growth of the 
financial services sector and of the broader Chinese economy. 
2. Questions from Australia to China concerning fi nancial services relate to the banking and 
insurance sectors. 
BANKING 3. Australia wishes to further clarify issues arisi ng from procedures issued in 2004 dealing with 
limitations on foreign banks borrowing off-shore to lend to businesses operating in China.  Australia 
understands that the Procedures on the Administration of Foreign Debts of Foreign Capital Banks in 
the Territory of China  issued on 27 May 2004, set limitations on the amount of foreign exchange 
funding foreign banks may acquire from overseas,  through the imposition of a quota system.  
4. As pointed out in last year’s communication (S/FIN/W/42) these procedures, combined with 
the provisions contained in Article 30 of the Administrative Regulations on Foreign Invested 
Financial Institutions , which inter alia  sets a 70 per cent limit on foreign bank holdings of foreign 
currency deposits, have increased costs and restricted  the market access of foreign banks, particularly 
those with smaller operations in China.   
5. In light of China’s GATS national treatment and market access obligations, please indicate 
how long China intends to maintain the quota system outlined in the Procedures on the 
Administration of Foreign Debts of Foreign Capital Banks in the Territory of China.  Now that the 
quota system has been in place fo r more than a year, please explain how, in practice, quotas for 
foreign exchange funding are determined.  How mu ch flexibility is available with respect to 
application of quotas? S/FIN/W/49 
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6. In light of China’s accession commitments in resp ect of Chinese-foreign joint banks, in which 
no limits on foreign equity ownership are sche duled, please explain why China presently limits 
foreign equity ownership to a maximum of 20% fo r a single foreign investor in existing Chinese 
domestic banks.   
7. Similarly, in light of China’s “horizontal” GATS commitments, in which China scheduled a 
minimum  of 25% foreign investment in a Chinese-fore ign equity joint venture, please explain the 
rationale for why China imposes a foreign investment limitation of a maximum  of 25% aggregate 
foreign ownership of Chinese domestic banks.  
INSURANCE 8. China committed to open its group life, health, pension and annuity market to international 
participation within three years after accession.  Australia notes that China’s revised GATS offer 
confirms that foreign participation in such business would be permitted with immediate effect.  Please 
indicate when implementing measures will be issued  by the China Insurance Regulatory Commission 
to provide specific guidelines and approval criteria/pr ocedures for foreign insurers interested in 
providing such services so as to give effect  to China’s commitments in this area. 
 
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