RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/M/57 
4 December 2008 
 (08-5959) 
Committee on Trade in Financial Services  
  
 
REPORT OF THE MEETING HELD ON 1 DECEMBER 2008 
 
Note by the Secretariat
1 
  
1. The Committee on Trade in Financial Services he ld a meeting on 1 December 2008, under the 
chairmanship of Mr. Tom Goodwin (United Kingdom ).  The agenda is contained in Airgram 
WTO/AIR/3288.   
A. A
DOPTION OF THE ANNUAL REPORT TO THE COUNCIL FOR TRADE IN SERVICES  
2. The Chairperson drew Members' attention to document S/FIN/W/65, containing a draft report 
of the Committee's activities in the past year.   
3. The Committee adopted  the annual report without introducing changes to the draft.     
B. ACCEPTANCE OF THE FIFTH PROTOCOL TO TH E GENERAL AGREEMENT ON TRADE IN SERVICES 
EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS  
4. The Chairman  recalled that three WTO Members had yet to accept the Fifth Protocol:  Brazil, 
Jamaica, and the Philippines.  He informed  the Committee that he had received a written 
communication from the Philippines advising him that, regrettably, there had not been significant 
developments regarding the country's domestic accepta nce procedures.  He added that he had received 
assurances that the Executive Branch  in the Philippines was workin g with the Senate to secure 
acceptance of the Protocol as soon as possible.  Th e Chairmen then invited Brazil and Jamaica to 
provide information on the status of their domestic processes.  
5. The representative of Brazil  said that the domestic acceptance procedures had not been 
concluded yet, and that he could not indicate an y specific date for when that might happen.   
6. The representative of Jamaica  said the Protocol was still under consideration within the 
Ministry of Finance, and had not been sent to th e Legislature yet.  Jamaica was taking a prudent 
approach to the issue, particularly in light of recen t financial turmoil.  It was not possible for him to 
provide a specific date for the acceptance of the Protocol at this stage.   
7. The Chairman  thanked these two delegations for thei r updates, and encouraged the three 
Members concerned to accelerate their internal procedures for the acceptance of the Protocol.   
8. The Committee took note  of the statements made and decided  to revert to this agenda item at 
the next meeting. 
                                                      
1  This document has been prepared  under the Secretariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO.  S/FIN/M/57 
Page 2  
 
  C. 
TECHNICAL ISSUES  
9. The Chairperson  recalled that there had been no discussion under this agenda item at the last 
meeting.  He remained convinced that the Co mmittee could have a role  in supporting, from a 
technical viewpoint, the Doha market access nego tiations that were underway.  The Committee could 
also provide an appropriate forum for dialogue between the trade community and the regulatory 
community. 
10. He recalled that a process of informal consu ltations had been started last year, with the 
purpose of addressing a range of issues that might have a bearing on the market access negotiations, and exploring them from a number of different persp ectives.  On the basis of that approach, he had 
convened two informal consultations with a representative group of Members, in June and 
October 2008, to discuss two issues:  the trade-re lated aspects of Islamic Banking, and the trade-
related aspects of microfinance.  The discussions were based on two room documents prepared under 
the Chair's responsibility.  The meetings contributed  to a better understanding of those issues and to 
the identification of potential trade aspects that ma y have a bearing on market access negotiations.  It 
had become clear that these issues required further discussion. 
11. The Chairperson confirmed his intention to continue with these informal consultations, 
focusing on issues that Members might want to propose.  He would consult in order to identify potential topics for further discussion.  
12. No Member took the floor under this agenda item.  
13. The Committee took note
 of the Chair's statement and decided  to revert to this agenda item at 
the next meeting. 
D. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE  
14. The Chairperson  was of the view that discussion under th is agenda item could be revitalized 
in the coming year.  This could provide the opportu nity for Members to make individual presentations 
on recent developments in their own markets.  Add itionally, it could be used as an occasion to discuss 
other issues of relevance, such as financial services liberalization in Preferential Trade Agreements, or 
other global market developments of interest to Me mbers.  He recalled that there had been many far-
reaching developments recently, linked to the ongoi ng financial crisis.  This crisis had had 
consequences which had been discussed in a number of WTO subsidiary bodies – most notably the 
informal Heads of Delegation meeting of 12 Novemb er and in recent meetings of the Working Group 
on Trade, Debt and Finance.  The implications fo r trade generally had also been discussed in other 
international organizations, such as UNCTAD and ILO, and gatherings, such as the recent G-20 
Heads of State Summit.  In his view, the role of the Committee on Trade in Financial Services in 
particular was to keep these developments under re view from the perspective of the agreements that 
Members had reached, and that they might reach in the future, on trade in financial services.   He 
called on Members to address these issues from that perspective. 
15. No Member took the floor under this agenda item.  
16. The Committee took note  of the statement made by the Chairperson and decided  to revert to 
this agenda item at the next meeting.    S/FIN/M/57 
 Page 3 
 
 
  E. TRANSITIONAL REVIEW UNDER SECTION 18 OF THE PROTOCOL ON THE ACCESSION OF THE 
PEOPLE 'S REPUBLIC OF CHINA  
17. The Chairperson  recalled that the Committee was manda ted to conduct this review pursuant 
to section 18 of the Protocol on the Accession of the People's Republic of China.  Paragraph 4 of Section 18 of the Protocol stated that the "review provided for in paragraphs  1 and 2 will take place 
after accession in each year for eight years.   Thereafte r there will be a final review in year 10 or at an 
earlier date decided by the General Council."  This  would be the seventh such review conducted by 
this Committee.  For this year's review, written communications had been received in advance from 
the following Members:  Japan (S/FIN/W/64);  the European Communities (S/FIN/W/66);  Canada 
(S/FIN/W/67);  and the United States (S/FIN/W/68). 
18. The representative of China
 said that the current financial crisis had not only affected 
Members' economic development and living standards,  but also brought greater uncertainty to world 
trade.  The causes of the crisis were multiple, in cluding improper macroeconomic policies and lack of 
adequate financial supervision.  If there was a clear lesson that could be drawn from this crisis it was 
that Members should remain vigilant, and improve financial supervision, reinforce disciplines, and 
strengthen international policy communica tion, coordination and cooperation.  
19. This global crisis revealed that in the past few years financial institutions in some developed 
economies had failed to make prudential commercial decisions based on sound analysis.   Instead, 
they had engaged in excessive market speculation in  pursuit of irrational capital gains.  In the 
meantime, government authorities' failure to perfo rm their supervisory duties had aggravated the 
situation and contributed to the crisis to a larg e extent.  As a developing country, China's capital 
market, compared with those of developed Member s, was still in its infancy.  Nevertheless, upon 
accession to the WTO, China had made comprehens ive commitments, granting broad market access 
to its financial sector.  China had been  faithfully honouring these commitments. 
20. The year 2008 had been particularly challengi ng for China.  Both natural disasters and the 
international financial crisis had had an strong impact on the economy.  Under such circumstances, 
the Chinese government had made some policy adju stments, and strengthene d macroeconomic control 
with a view to ensuring a stable economic enviro nment.  Measures adopted included the lowering of 
deposit reserve ratio, cutting down lending rates, and relaxing the tax burde n of enterprises, among 
others.  More recently, a big economic stimulus pl an had been announced, involving the injection of 
RMB 4 trillion between the fourth quarter of 2008 a nd the end of 2010, in order to boost domestic 
demand.  These measures were also a contribution fr om China to world financial market stability and 
economic development.  
21. Before turning to the questions raised by some  Members prior to the meeting, she clarified 
that since the US submission had arrived only on the evening of 27 November, some of the questions raised therein might have remained unanswered due to  lack of sufficient time.  Additionally, she noted 
that paragraph 3 in the submission by the Europ ean Communities was misleading;  it seemed to be 
requesting China to address issues related to import licensing in this Committee, which should not be 
the case. 
22. She first turned to the questions on insurance services.  In response to question 1 by Canada, 
question 8 by the European Communities, and ques tion 1 by the United States, she indicated that 
China had been performing the review and approval  of internal branch applications from foreign 
insurance companies in accordan ce with its accession commitments and related regulations.  The 
applications of Chinese and foreign companies were subject to the same regulation, which was fully 
in line with WTO rules.  Reviews and approvals  by the China Insurance Regulatory Commission 
(CIRC) were consistent with the national treatment  requirement.  She added that national treatment 
did not simply mean equal in quantity.  S/FIN/M/57 
Page 4  
 
  23. In response to question 2 by Canada and the Un ited States, she indicated that the moratorium 
had been imposed with the aim of strengthening the regulation and supervision of the insurance 
market.  She added that CIRC would consider lifting the moratorium in light of circumstances after the market was back in order.  This moratorium di d not affect the market ac cess of foreign insurance 
companies or the internal branch approvals.  The mora torium was only targeted at sales offices, not at 
foreign companies coming to China or at foreign comp anies' applications for internal branching.   
24. With regard to question 3 by Canada, she clarified that the Provisional Measures Governing 
Insurance Asset Management Companies  and the Measures for the Overseas Investment with 
Insurance Funds  were two different regulations targe ting different objects and with different 
purposes.  It was therefore inappropriate to say th at the latter superseded the former.  The two 
requirements in Article 8 of the Provisional Measures  were still applied to insurance companies 
seeking to set up asset management companies.  
25. With regard to question 6 by the United Stat es, she said that due to the importance of 
insurance in everyday life, it was necessary for th e representatives of insuran ce companies to stay for 
a sufficient period of time to gain deep insight and practical knowledge of the local situation, with a 
view to conducting appropriate anal ysis and taking prudent business decisions.  China considered the 
minimum-stay requirements to be reasonable.  
26. In response to question 5 by Japan, concerning minimum capital requirements, she said that 
there was no uniform international standard for insu rance companies.  The capital requirement applied 
in China was the same for both domestic and foreign in surers.  Besides, this standard was set at the 
time of China's accession and had never been increased since.  
27. With regard to question 6 by  Japan, she noted that the Administrative Methods on Equity 
Interest in Insurance Companies  were at the revision stage.  The competent authorities would 
carefully study the comments and feedbacks received from stakeholders and give  due consideration to 
them.  
28. Turning to the questions on reinsurance ser vices raised by Japan, she said that the 
Administration of Reinsurance Business Regulation s was not against the commercial freewill 
principle.  Article 11 only required prior solicita tion, but did not force the transaction outcome.  
Therefore, these requirements were not inconsiste nt with China's accession commitments, and were 
compliant with the national treatment principle.  The Insurance Law, which was under revision, would 
further clarify and adjust these requirements.  Add itionally, in order to better prevent risks, CIRC 
supervised affiliated reinsurance transactions in  accordance with prudential criteria set out by the 
International Association of Insurance Supervisor s (IAIS).  Once the foreig n insurer's reinsurance 
plan was approved, the company was allowed to conduct reinsurance transactions with affiliated 
companies.  Japan's interpretation of Article 22 was therefore incorrect. 
29. She then turned to questions on banking services.   In response to questions 7 by Japan and 9 
by the United States, she said that the scope of business of foreign banks branches was defined so as 
to protect the interest of depositors, and was consis tent with the principle of prudential supervision 
and regulation.  Because branches were not legal en tities, it was difficult for China, as a host country, 
to control the overall risk and to separate the ri sks arising from the parent bank from those arising 
from the branches in China.   Since, on the one hand, as stipulated in bankruptcy legislation in many Members, the sequence of liquidation was in favour of domestic rather than foreign depositors, and, 
on the other hand, only legal entities – instead of  branches – were allowed to join the deposit 
insurance systems in many Members, once the parent  bank was at risk and its Chinese branch was 
affected, then the interests of Chinese depositors coul d not be guaranteed.  Therefore, it was important 
for China to take prudential measures to prot ect Chinese depositors, especially the small- and 
medium-sized ones.  S/FIN/M/57 
 Page 5 
 
 
  30. Regarding questions 4 and 6 by the Eur opean Communities on capital requirements for 
subsidiaries of foreign banks a nd their scope of business, she considered that the European 
Communities had misunderstood China's policy.  Article 44 of the Regulation on the Administration 
of Foreign-invested Banks  stipulated that 30 percent of the  op erating capital of a branch of a foreign 
bank shall be deposited in no more than three Chines e commercial banks within the territory of China 
in the form of interest-generating assets as designated by the banking regulators.  Risk supervision of 
foreign bank branches raised more difficulties a nd uncertainty than the supervision of locally 
incorporated subsidiaries.  Therefore, for prude ntial purposes, China had adopted more stringent 
requirements for the branches of foreign banks.  Ho wever, China offered equal treatment to locally 
incorporated subsidiaries of foreign banks and to domestic banks.  Regarding foreign debt, she 
confirmed that China would continue to supervise and  regulate overall systemic risk, and to control 
the overall scale of foreign debt, with a view to securing the national economy by using different 
policy instruments.   This was well accepted internationally.   
31. Regarding the five-year waiting period, it seemed that the European Communities had 
misinterpreted China's policy again.  As clear ly stipulated in China's Schedule of Specific 
Commitments, the requirements for foreign financia l institutions to engage in local currency business 
were the following:  three years business operation in  China, and being profitable for two consecutive 
years prior to the application.  Therefore, it was not a five-year waiting period, as understood by the European Communities.  China's current practi ce was fully in line with its commitments.  
32. Regarding the shareholding cap of foreign i nvested banks, the Regulation of the People's 
Republic of China on the Administration of Foreig n-Invested Banks and the Detailed Rules for the 
Implementation of the Regulation of the People's Re public of China on the Administration of Foreign-
Invested Banks allowed qualified foreign financia l institutions to establish wholly foreign-owned 
banks or joint-venture banks wit hout any equity cap on foreign investment.  At the same time, 
according to China's laws governing foreign invest ment and the horizontal commitment in China's 
GATS schedule, "the proportion of foreign investment in an equity joint venture shall be no less than 
25 percent of the registered capital of the joint venture."  In other words, the criterion for determining 
whether an enterprise was qualified as a joint-venture was that foreign equity participation be no less 
than 25 percent.  
33. Regarding the questions on capital requireme nts raised by the European Communities 
(question 6) and the United States (questions 9 and 11), she said that China Banking Regulatory 
Commission (CBRC) did not grant differential treatment for foreign-invested legal entities and 
foreign bank's branches with regard to business sc ope.  Foreign banks' branches were also permitted 
to do retail business in China.  The requirem ent on minimum operating capital of these branches was 
determined by taking into account the special organi zational structure, the risks associated with the 
business scope of branches, and China's existing regulatory capacity.  Since 2003, CBRC had lowered 
twice the operating capital requirements for branches  of foreign banks.  The new Regulation and its 
Implementation Rules further streamlined the requi rements to only two categories.  CBRC was of the 
view that the new regulation met the diversified n eeds of foreign banks while maintaining prudential 
supervision and regulation. 
34. Regarding the data location mandated by the ba nkcard policy, it was not clear to her where 
the European Communities had gotten this informati on from, since there were some inaccuracies in 
the document references.   Nevertheless, she clarifie d that China had always required all foreign banks 
having a legal entity status to place their data sy stems in China, and that policy had never been 
changed.  
35.
 Turning to securities services, sh e said that the relevant info rmation sought by the United 
States in question 13 of its submission was availa ble at the China Securities Regulatory Commission 
website (www.csrc.gov.cn). S/FIN/M/57 
Page 6  
 
  36. Finally, regarding transparency-re lated issues (questions 5, 15 and 16 in the submission by the 
United States), she considered that China had faithfully honoured its accession commitments.   A 30-
day period for comment between promulgation and entr y into force of all laws, regulations and rules 
was provided to any individual, enterprise and to other WTO Members.  China's Foreign Economic 
and Trade Gazette  was the only official journal designated by the Chinese government to publish all 
the trade-related laws and regulations.  The di gital version of the Gazette was published on 
MOFCOM's website and was e-mailed to domestic and foreign users free of charge.  The Chinese government had also established an enquiry point and an enquiry website at MOFCOM and AQSIQ to 
provide comprehensive and convenient inquiry ser vices to any individual, enterprise and WTO 
Member.  This was in line with notification obligatio ns at the WTO.  In addition, to honour China's 
commitments, the Legal Affairs Office of th e State Council annually published Chinese-English 
versions of the collection of laws and regulations an d had set up an official website to publish drafts 
of regulations promulgated by central govern ment agencies, including CIRC, CSRC, CBRC and 
MOHRSS.  
37. She considered that China had improved its le gislative procedures and enhanced legislative 
transparency.  All the ministries and agencies under the State Council had to conduct public opinion 
solicitation in writing or by way of symposia and interntional workshops  to provide an opportunity for 
interested parties to offer their comments and opinions with regard to drafts a nd revisions of laws and 
regulations.  In recent years, drafts of more than 30 laws and regulations had undergone public 
opinion solicitation via media such as websites, newspa pers and television.  She added that the draft 
of the Insurance Law was a good example of transparency procedures. 
38. The representative of Canada
 took particular note of two responses provided by China, 
namely, the update on the status of the moratorium for the approval of sales offices of insurance companies, and the clarification provided with re gard to the relationship between the measures on 
overseas investments of insurance funds and those governing insurance asset management companies.  
He underlined also China's commit ment to permit branch expansion of insurance firms consistent 
with the phase-out of geographical restrictions, the last stage of which had taken place in 2004.  
Canada had observed, however, that branch and sub-branch approvals for foreign-invested firms 
remained lengthier than for domestic firms, but t ook note of the explanations provided by China on 
that issue.  
39. The representative of the European Communities
 clarified that paragraph 3 of their 
submission had been introduced by mistake.  Add itionally, she explained that question 7 referred to a 
draft bank card policy under consultation that might  indeed imply a potential policy change.  While 
taking note of China's confirmation with regard to  the equal applicability of requirements for foreign 
and domestic insurers; she nonetheless observed that, according to the European insurance industry, 
domestic firms could apply for several branch li cences simultaneously while foreign insurers were 
constrained to apply for one branch licence at a time.  The European Communities would welcome a 
clarification from China as to whether the appli cation and review requireme nts did apply equally to 
both foreign and domestic insurers, not only on a de jure  basis but also on a de facto  basis.   
40. She then turned to banking services.  Article 8 of the Measures for the Administration of 
Investment Shareholding provided that the percen tage of equity investment of a single overseas 
financial institution in a Chinese-funded financial in stitution could not exceed 20 percent.  Therefore, 
she added, foreign ownership might exceed 20 percent, but not from a single foreign institution.  She 
sought further clarification on this point.  
41. The representative of the United States  requested more thorough responses to some of the 
questions raised by his delega tion in its written submission.  S/FIN/M/57 
 Page 7 
 
 
  42. The representative of Japan  said that two of the questions raised in the submission had not 
been clearly answered, namely question 3 on rein surance services, and question 6 regarding the 
Administrative Methods on Equity Interest in Insurance Companies .   
43. The representative of China  replied to the question raised by the European Communities on 
the data location of bank cards by explaining that , since RMB cards had only recently been opened up 
for business for foreign-invested banks having the stat us of legal entities, these banks did not have a 
data processing system to support this new line of  business.  Therefore, setting up data processing 
systems in China should be deemed a "new establishm ent" rather than "relocation."  She noted that 
foreign banks could choose to establish a new data  processing system or outsource this business to a 
specialized agency established in China.  She added that the draft Regulation on bank cards was still 
under consideration, but that the requirement for co mmercial banks to localize their computer systems 
in China had not been changed. 
44. With regard to the questions on the foreign equity caps in banking, she said that China 
allowed the establishment of wholly-owned foreig n-invested banks.  The 20 percent cap was a 
limitation on investment in Chinese banks.  If the ag gregate of foreign investment in Chinese financial 
institutions was less than 25 percent, that in vestment was not subject to the rules on the 
Administration of Foreign-Invested Banks .  However, if the foreign i nvestors wished to raise their 
aggregate shareholding in a Chinese bank above 25 percent, that would be regarded as the 
establishment of a new joint venture, and the transaction would require approval by the CBRC 
according to the rules for the Administration of Foreign-Invested Bank and the  Detailed Rules for the 
Implementation of the Regulation .  Therefore, in her view, the measures mentioned constituted 
autonomous liberalization by China, and were fu lly consistent with China's WTO commitments. 
45. In response to question 8 by the United States, she said that the financial sector was very 
vulnerable to risks.  As a matter of fact, Chin a had been shocked by the developments in the 
American International Group (AIG), which had b een granted grandfather rights in China.  She 
further observed that the GATS' Preamble stipulat ed that Members had the right to strengthen 
supervision and regulation, and that the recently concluded G-20 summit also recognized the 
importance of regulation and superv ision and called for joint efforts in this area.  She added that 
China would stick to the policy goal of financial secu rity and the strengthening of market supervision.  
In response to question 4 by the United States, she clarified that  the China Post Life Insurance 
Company had been approved, but had not been established yet.   
46. Finally, she repeated her replies to questions 3 and 6 by Japan.  
47. The representative of Japan  said that, as indicated in question 3 of her country's submission, 
Administration of Reinsu rance Business Regulations  required direct insurance companies to seek, 
from at least two reinsurance comp anies in China, reinsurance o ffers amounting to more than 
50 percent of the reinsurance to be  ceded.  She welcomed China's cl arification that this was not a 
compulsory requirement.  However, according to  information provided by the Japanese insurance 
industry, this requirement was perceived as compulsory de facto , and actual activities were affected 
by this measure.   
48. She welcomed the comment by China – with refe rence to Japan's question 6 – that the draft 
Administrative Methods on Equity Interest in Insurance Companies  were still under consultation.  
However, she also noted that this draft stipulated  that any approved foreign financial institution was 
not allowed to make investments or hold shares in China's insurance companie s.  Concerns remained 
therefore regarding the consistency of this measure with WTO disciplines.   
49. The representative of China  requested Japan to send its comments on the draft measures to the 
Chinese competent authorities through the pertinent bilateral channels. S/FIN/M/57 
Page 8  
 
  50. By way of conclusion, the Chairperson
 invited the Committee to take note of the statements 
made.  Secondly, he requested the Secretariat to prepare a report, to be presented to the Council for 
Trade in Services.  It would be a f actual report, stating basically that:  
(a) pursuant to section 18 of the Protocol on the Accession of the People's Republic of 
China, the Committee 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 1 December 2008;  
(b) written communications had been received from four Members, namely Canada, the 
European Communities, Japan, and the United States;  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/57.  
51. The Committee so decided . 
F. DATE OF THE NEXT MEETING  
52. The Committee agreed  to hold its next meeting together w ith other services subsidiary bodies.  
The exact date would be announced in due course.   
G. OTHER BUSINESS  
53. There was no issue raised under this agenda item. 
_________