. /. RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/48 
12 September 2005 
 (05-3937) 
Committee on Trade in Financial Services  Original:   English 
  
 
 
COMMUNICATION FROM THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, 
PENGHU, KINMEN AND MATSU 
 
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 7 Septembe r 2005, from the delegation of the Separate 
Customs Territory of Taiwan, Penghu, Kinmen and Ma tsu is being circulated to the Members of the 
Committee on Trade in Financial Services.   
 
_______________ 
  
Questions and Comments of the Separate Customs Territory of Taiwan
, 
Penghu, Kinmen and Matsu on the Implementation by China  
of its Commitments on Trade in Financial Services  
 
 1. It is our understanding that, in accordance w ith the provisions of the WTO Agreement, 
China’s Accession Protocol, the Report of the Wo rking Party on China’s Accession, and China’s 
Schedule of Specific Commitments, upon its accessi on, China was committed to ensuring that 
licensing procedures and conditions would not act as barriers to market access and would not be more 
trade restrictive than necessary.  We recognize Ch ina’s efforts to improve its business environment 
and its implementation of WTO commitments over the past few years, with the aim of further integrating with the global economy.  In the interest s of achieving this goal, it would be appreciated if 
China could provide further clarification, in its r esponses to our questions below, of certain aspects of 
its implementation of market access commitments in the banking and insurance services sector as 
contained in its Schedule of Specific Commitments.  
I. BANKING SECTOR 
2. China requires that foreign bank branches, depending on which service items they offer, must 
have between RMB100 million and 500 million in operating capital. Ou r view is that factors such as 
the asset quality of the home bank, the home bank’s co mmitment to, and financial support for, branch 
operations, and close cooperation be tween the financial regulatory authorities of the two economies in 
question (the branch’s economy and the home bank’ s economy) are more important in terms of 
international financial supervision than a so le requirement for inward-remitted capital.  
3. We would appreciate further clarification of how such minimum capitalization requirements 
are consistent with the regulatory disciplines as stipulated in GATS Article VI.4, as well as with 
China’s own commitments.  We wonder whethe r China has any plans to reduce the minimum 
capitalization requirements, and, if so, what the time schedule relating to such plans is? S/FIN/W/48 
Page 2  
 
 4. China requires that the total assets of applicants  seeking to establish foreign bank branches be 
no less than US$ 20 billion.  Our view is that the qualit y of a bank’s condition is not directly related to 
the quantity of its assets. 
5. We would be grateful, therefore, if China c ould further explain its rationale for focusing 
solely on such an asset requirement, and could cl arify how this does not constitute an unnecessary 
barrier to trade.  Furthermore, would China cons ider lowering this standard or adopting a more 
flexible requirement, such as using the total assets of the financial holding company or financial group 
as an indicator? 
6. According to China’s “Management Measures on Ex ternal Debts of Foreign Capital Banks in 
China”, there is a limitation on the total amount of external debt of foreign capital banks, including 
their mid-term and short- term external debts. 
7. However, in view of the fact that it is not easy for foreign banks to absorb savings locally, 
because most have to rely on loans from abroad for the operating capital they need, we would be 
interested in China’s views on how this meas ure is not more restrictive than necessary. 
II. INSURANCE SECTOR 
8. China requires that foreign insu rance companies setting up subs idiaries or branches in China 
must first have a representative organization set up in China for two or more years.  
9. According to our experience, on average it take s only a matter of several months for foreign 
insurance companies to complete the licensing pro cedures required to set up subsidiaries or branches 
in China.  We would therefore like to ask Ch ina if it will reduce the period applying to this 
requirement to one or more years, so as to comply more with the spirit of GATS Article VI.5. 
 
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