RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/71 
22 October 2009 
 
 (09-5218) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM JAPAN 
 
Transitional Review Mechanism pursuant to Paragraph 18 of
 
the Protocol of the Accession of the People’s Republic of China  
 
Questions and Comments of Japan on the Implementation by China  
of its Commitments on Trade in Financial Services  
  
 The following communication, dated 19 Octobe r 2009, from the delegation of Japan, is being 
circulated to the Members of the Comm ittee on Trade in Financial Services. 
  
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1. Japan recognizes and welcomes China’s continuous efforts for eight years to implement its 
WTO commitments on financial services.  Japan beli eves that liberalisation of the financial services 
sector will not only enhance its efficiency, but also contribute to China’s overall economic growth.  In 
this context, Japan continues to  encourage China to make furthe r efforts to ensure regulatory 
transparency, including with regard to  th e establishment of a commercial presence, thus 
maximising the benefits of liberalisation.  Japan is  of the view that there is still room for further 
improvements in this area, in view of China’s co mmitment to transparency as described in the Report 
of the Working Party on the Accession of China. 
2. In accordance with paragraph 18 of the Protoc ol on the Accession of the People’s Republic of 
China, which states that “China shall provide releva nt information to each subsidiary body in advance 
of the review” and in the spirit of co-operati on to render the TRM process most efficient and 
effective, Japan requests that China provide, in advance of the regular meeting of the Committee on 
Trade in Financial Services, responses to and releva nt information about the following questions and 
comments. 
I. INSURANCE 
A. L
IMITATION ON REINSURANCE  
3. While Japan welcomes China’s efforts to amend insurance regulations of the Insurance Act, 
Article 11(2) of the amended Administration of Re insurance Business Regulations, which is available 
for public comment, requires that, in the case of vol untary reinsurance the insured amount or the limit 
of liability assumed by the affiliated enterprises of a policyholder as ceded pursuant to a temporary 
reinsurance contract shall not exceed 20% of the insured amount or the limit of liability assumed by 
the direct insurance business.  This may pose seri ous problems to risk management of insurance 
companies.  Japan would like China to explain how this limitation can be ju stified when no limitation 
is scheduled regarding cross-border trade in reinsurance. S/FIN/W/71 
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  4. Article 23 of the amended Administration of Reinsurance Business Regulations prohibits 
foreign insurers from engaging in the reinsura nce business with their affiliates unless approved 
otherwise by the CIRC.  Japan would like China to provide details of the criteria for approval by the CIRC for the sake of transparency.  In addition, Jap an would like China to provide us with the number 
of your approvals since the last TRM. 
5. Please provide information as to when the amended Administration of Reinsurance Business 
Regulations comes into force. 
B. T
RAINING OF SENIOR STAFF OF INSURANCE COMPANIES  
6. The Provisional Regulations on Administration of Training of Board Members, Auditors and 
Senior Management Staff of Insurance Corporati ons require training for senior staff of insurance 
companies and provide detailed stipulations as to the frequency and minimum training period 
depending on various levels of senior staff.  At  this moment the regulations do not seem to be 
implemented, but if implemented, insurance co mpanies will bear a significant burden which may 
affect their day-to-day operations.  Moreover, while  there is no specific stipulation about the language 
of the training, in the case where the language is li mited to Chinese, it will be an additional burden to 
non-Chinese staff of foreign-funded insurance comp anies.  Japan would like China to provide 
information as to the planned timeline for the im plementation of the training and whether China is 
willing to flexibly implement the regulations for foreign-funded insurance companies, especially 
regarding language for training.  
C. REQUIRED CONDITION OF DISSOLUTION OF FOREIGN -FUNDED INSURANCE COMPANIES  
7. Japan understands that the dissolution of forei gn-funded insurance companies is not permitted 
for a certain period from the establishment.  As th e Japanese insurance compan ies in China have an 
interest in this issue, Japan would like China to  confirm the relevant domest ic laws and regulations 
and to give explanation on the c onsistency with China’s schedule of  commitments, namely with the 
obligation of National Treatment. 
II. BANKING 
A. COMPULSORY INSTALLATION OF INDEPENDENT PAYMENT SYSTEM  
8. Locally-incorporated banks are required to inst all core system regarding payment (financial 
accounting system and clearance system) and operationalise the system in China by March 2011.  Although this regulation is applie d equally to both foreign-funded and Chinese banks, practically only 
foreign-funded banks will face additional burden as they need new investment to install and 
operationalise the system, whereas Chinese banks bear no such additional cost as they naturally install 
and, operationalise the system in China.  Theref ore, there may be concerns as to whether this 
regulation could lead to impose huge burden on ly on foreign-funded banks, which may cause 
problems regarding the consistency with China’ s schedule of commitments, namely with the 
obligation of National Treatment.  
B. L
OCAL CURRENCY RETAIL BUSINESS AND IMPROVEMENT OF LIQUIDITY  
9. China requires foreign banks to be locally incorp orated if they are to engage in the local 
currency retail business.  In the TRM held in 2008,  China explained it was a prudential regulation.  
Japan would like to know whether China intends not to allow consumers to choose in which banks to 
deposit RMB.    S/FIN/W/71 
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  10. In case of a RMB liquidity crisis, foreign-funded  banks will have difficulty to ensure a stable 
supply of RMB liquidity as the amount of deposits are limited under the abovementioned restriction 
on local currency retail business.  It will be appreciated  if China could explain whether it is possible to 
consider the introduction of measures to provide RMB liquidity in response to a RMB liquidity crisis.  
C. FOREIGN EQUITY LIMITATION  
11. In the meeting of Committee on Trade in Fina ncial Services held on 1 December 2008, China 
explained that the percentage of equity invest ment of a single overseas financial institution in a 
Chinese-funded financial institution could not exceed 20 percent.  Japan would like to know how this 
restriction on foreign equity partic ipation can be justified in light of China’s schedule of commitments 
which does not stipulate such limitation on the fore ign equity participation of a single institution. 
III. SECURITIES 
12. Regarding the Qualified Domestic Institu tional Investor (QDII) programme, Japan 
understands that no new quota has been allocated since spring 2008.  Japan would like China to explain whether there is a plan to resume quota al location.  In addition, Japan would like China to 
confirm the relevant domestic la ws and regulations on the service provision for QDII by overseas 
financial institutions and to give explanation on the current status of the service provision for QDII by 
overseas financial institutions. 
 
 
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