RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/M/50 
23 September 2005 
 
 (05-4222) 
Committee on Trade in Financial Services  
  
REPORT OF THE MEETING HELD ON 19 SEPTEMBER 2005 
 
Note by the Secretariat
1 
  1. The Committee on Trade in Financial Services held a meeting on 19 September 2005, under 
the Chairmanship of Mr. Guido Kemmerling (Germa ny).  The agenda is contained in airgram 
WTO/AIR/2647.  
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/47, containing a draft report 
of the Committee's activities in 2005.  
3. With regard to paragraph 2 of the draft report, the representative of the United States  
suggested that the following sentence be added af ter the first sentence:  "Some Members expressed 
concern that the three Members have not yet accepted the Fifth Protocol."   
4. The representative of Brazil  suggested that the following sentence be added to the final 
paragraph of the report:  "Some Members e xpressed concern with the presentation of this 
communication at the Committee on Trade in Financial Services."    
5. The Committee adopted  the annual report with those amendments.   
B. TRANSITIONAL REVIEW UNDER SECTION 18 OF THE PROTOCOL ON THE ACCESSION OF THE 
PEOPLE 'S REPUBLIC OF CHINA  
6. The Chairperson  recalled that the Committee was manda ted to conduct this review of the 
implementation by China of its commitments pursuan t to section 18 of the Protocol on the Accession 
of the People's Republic of China.  For this year 's review, written communications had been received 
in advance from the following Members: the European Communities (S/FIN/W/44);  the United 
States (S/FIN/W/45);  Japan (S/FIN/W/46);  Chinese Taipei (S/FIN/W/48);  and Australia (S/FIN/W/49).   
7. The representative of China
 said that the Chinese government had always attached great 
importance to the strict compliance with its commitme nts in the WTO.  In the past year, the financial 
authorities had made enormous efforts to serious ly implement China's commitments through the 
improvement of market access conditions for forei gn-funded financial institu tions, as well as through 
the enhancement of transparency and effici ency of their financial regulatory work. 
8. Rules for Implementing the Regulation Governi ng Foreign-funded Financial Institutions in 
China, which took effect on 1 September 2004, had promoted the development of foreign-funded 
banks in China.  With the establishment of an  effective banking regulatory framework and the 
cultivation of a fair competition environment, th e safe operation of the banking system would better 
safeguard the sustainable development of the economy.  
                                                      
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/50 
Page 2  
 
9. In the past year, foreign service providers had been speeding up their steps to access the 
Chinese financial services market while China's co mmitments phased in.  The number and market 
share of foreign financial institutions had increased dramatically.  
10. In the case of the banking industry, follo wing an earlier-than-co mmitted opening of RMB 
business to foreign-funded banks in the cities of  Shenyang and Xi'an last year, RMB business in 
Shantou and Ningbo would be opened in December this year strictly as committed.  Thus, RMB 
business in 20 cities across China would be open to fo reign-funded banks by then.  By end July 2005, 
foreign banks had established 227 operational entiti es in China.  In addition, 133 foreign-funded 
banks had been approved to opera te RMB business up to now, includi ng 73 banks approved to operate 
RMB business for non-foreign invested enterprises;  15 foreign banks were permitted to provide on-
line banking services;  41 foreign-funded banks we re permitted to carry out derivative products 
transactions;  and 5 foreign bank branches were pe rmitted to offer custodian services for securities 
investment by qualified foreign institutional investor s (QFII) in China.  Together with the increase of 
institutions, the business of foreign-fu nded banks was also developing ra pidly.  As of end July 2005, 
the total assets of foreign-funded banks in China had reached over US$ 79.29 billion.  
11. According to its commitments, China had phased out all geographical restrictions to foreign-
funded insurers by the end of last year.  Foreign-fu nded insurers may already carry out all kinds of life 
and non-life insurance business in China, besides t hose not included in the commitments.  He added 
that as of the end of this year, no compulsory  cession would be required anymore upon all lines of 
primary risks for non-life, personal accident , and health insurance businesses.   
12. Since the last review, the development and ope ning of the insurance industry in China had 
continued in good terms.  Institutional and business expansion of foreign-funded insurance companies 
had further accelerated.  At the same time, the turnover of foreign-funded insurers was growing 
dramatically.  According to the Chinese Insurance Regulatory Commission (CIRC), the growth rate of 
foreign-funded insurers was 4 to 5 times that of domestic insurers .  In 2004, the premium of general 
insurance companies and life insu rers increased by 52.1 per cent and 44.7 per cent, respectively, 
compared to the same period in 2003.   In the same period, the insura nce premiums of all insurers in 
China had increased by just 11.3 per cent. 
13. China was also implementing its WTO commitments on the liberalization of securities 
services in a serious manner.  The Chinese Government  encouraged the establishment of joint venture 
securities companies and joint venture fund management companies through the business involvement of qualified foreign securities institutions.  By end August 2005, the Chinese Securities Regulatory 
Commission (CSRC), had approved 4 foreign-funded  securities companies and 19 foreign-invested 
fund management companies to be set up.  Twen ty-seven foreign institutions had obtained the 
qualification of QFII, and the permitted investment quota would gradually increase from US$4 billion to US$10 billion. 
14. China had introduced a large number of libera lizing measures in the financial area, in 
response to the reform deepening reform and openi ng-up processes, and its commitments in the WTO.  
As a result, the number and market share of fore ign financial institutions had grown dramatically, 
indicating that China was implementing its WTO commitments in a serious and positive manner.  
China was confident in the reform and further libera lization of its financial markets and in its ability 
to improve its regulatory framework.   
15. After this introduction, the representative of China turned to the second part of his statement.  
He first addressed horizontal issues  (questions on all three financial sub-sectors).  
16. Regarding the questions raised on reinsurance, he asked Members to refer to his introductory 
statement.  As to the calls for flexibility in furthe r relaxing geographical restrictions for foreign banks,  S/FIN/M/50 
 Page 3 
 
 
the requirement on newly established branches to engage in RMB business, and the quotas on foreign 
exchange funding, he asked Members to refer to China's Services Schedule.  
17. He then turned to China's minimum capital requi rement for financial services.  He explained 
that at last year's TRM, his delegation had given made a clear and detailed explanation of the legal 
nature and rationale of China's transparent and prudential minimum capital requirement.  He 
nevertheless took the opportunity to reiterate th at China had the right, as any other Member, to 
regulate its financial services through measures based upon prudential principles.  Member's right to 
introduce prudential measures, such as minimum cap ital requirements,  was not against the GATS and 
should not be challenged.  Thus, China's right  to impose minimum capital requirements based upon 
prudential concerns should be respected by other Members.  
18. Since December 2003, China had relaxed to some  extent its working capital requirement for 
40 branches of foreign-funded banks, taking into cons ideration the development of the banking sector.  
Although in his view there were no international standards for minimum ca pital requirements, as 
some Members had alluded to, and although in th e past some developed Members had refused to 
discuss the topic of prudential measures in the WTO,  he confirmed that China would continue to 
adjust and apply its minimum capital requirement in th e future based strictly on prudential principles 
and regulatory needs, and also in a fair and transp arent way.  As regards the detailed minimum capital 
requirements and other market access or regulatory measures in the sub-sectors of banking, insurance 
and securities, he asked Members to refer to the relevant regulations adopted in China and the 
responses provided in this and previous TRM meetings.   
19. He then turned to banking services .  Concerning the progress made in introducing a risk-
based management system, he said that the CBRC was currently studying the capital supervision and 
administration framework, and encouraging banks to  enhance the inside venture management under 
the new framework.  The CBRC had not yet issued a new programme for the implementation of the 
new capital agreement.  
20. Taking into consideration the actual situation of China's banking industry, the CBRC had 
established a general strategy for the implementati on of the new capital agreement on the basis of a 
"two-step" and "two-way" system.  During the first step, commercial banks should strictly follow the 
measures on the capital adequacy of commercial banks  to ensure that the minimum requirement of 
eight per cent was reached on 1 January 2007.  In the meantime, the CBRC would  accelerate supervision and inspection, and would encourage banks to promote transparency by disclosing 
information on time.  
21. As a second step, the CBRC would encourage Ch inese banks to promote venture management 
under the new framework, and to establish the inside  evaluation system under the new framework as 
soon as possible. Once the banks could manage according to the new framework, the CBRC would 
implement the new agreement and measure the requi rements on credit venture capital by using inside 
evaluation systems, and measure the requirement on  operation venture capital by using a standard and 
basic index.   
22. He further explained that the "two-way system" was the implementation of the new 
agreement on the Chinese banks with branches or s ubsidiaries abroad by using inside evaluation 
systems, and the measurement of requirements on th e operation venture capital by using a standard or 
basic index.  Other banks would still apply the curre nt rules on capital supervision and administration. 
Before the implementation of the new capital agr eement in China, the branches of foreign banks 
would be allowed to use the new agreement with th e same time schedule and in the same manner as 
domestic banks if the foreign banks were under th e new agreement.  In addition, the CBRC would 
carry out the supervision and administration of  these branches under the current framework.   S/FIN/M/50 
Page 4  
 
23. The practice of capital supervision and admini stration showed that CBRC would not consider 
lowering the requirements on the minimum regist ered capital and capital adequacy with the 
introduction of the new capital agreement.  
24. Turning to other questions, he said that in ge neral there was no limitation on the share of 
foreign banks in financial in stitutions.  According to the Regulations on the Administration of 
Foreign-Invested Financial Institutions, the Detailed Implementing Rules for the Regulations on the 
Administration of Foreign-Invested Financial Institu tions and the Measures on the Administration of 
Investment in Chinese Financial Institutions  by Foreign Financial Institutions, China permitted 
foreign banks to open foreign-owne d banks, joint banks and branches in China; and to invest in 
Chinese banks.  He explained that, according to Article 9 of the Measures on the Administration of 
Investment in Chinese Financial Institutions  by Foreign Financial Institutions, if the total share of 
foreign banks in a non-listed Chinese Financial Ins titution reached 25 per cent or more, the Chinese 
financial institution would be administrated as a fore ign financial Institution; and if the total share of 
foreign banks in a listed Chinese financial ins titution reached 25 per cent or more, the Chinese 
financial institution would still be administrated as a Chinese financial institution.  All these 
regulations and practices were not in violation of the commitments in China's Services Schedule.  
25. Replying to questions on minimum capital re quirements for each branch, he said that in 
addition to his previous reply on minimum capita l requirements, under relevant Chinese laws and 
regulations, branches of foreign-funded banks ma de their own decisions regarding their business 
scope, RMB business and, hence, the corresponding amount  of working capital. At present, since even 
the business scope and the clients of branches of th e same bank might differ, the risks the branches 
faced were not necessarily the same.  Therefore, China required that the working capital requirement 
and the capital adequacy ratio be met for each bran ch of a foreign-funded bank rather than for its 
overall commercial presence in China.  He added th at after the transitional period, China would open 
up its overall banking sector.  In the future, based on the principle of prudential supervision, China 
would consider how to apply the working capital re quirement to the overall commercial presence of a 
foreign-funded bank in China in the spirit of consolidated supervision.   
26. Turning to another question, he said that Chin a required that 30 percent of the working capital 
of a foreign bank branch be maintained in the fo rm of interest-bearing assets, including time deposits, 
in Chinese commercial banks or RMB government bonds.  This requirement was imposed with a view to keeping a certain amount of funds to pay primar y creditors in case of a foreign bank's failure.  Due 
to the frequent capital inflow and outflow from fo reign bank branches in China, Chinese authorities 
could not ensure effective supervision of the fu nds if they were placed with the foreign banks 
established in China.  This was also in line with  the practices of many countries that required a 
proportion of working capital to be maintained in the form of interest-bearing assets being deposited 
in other banks or used to purchase investment in struments with low risks such as government bonds.  
27. Regarding securities services,  the Administrative Measures on the Management of Securities 
Investment Fund Management Companies , promulgated by the CSRC, the Chinese Securities 
Regulatory Body, on 16 September 2004, had ente red into force on 1 October 2004 replacing the 
Rules on the Establishment of Fund Management Companies with Foreign Shareholding  that had 
been promulgated on 1 June  2002.  According to  Paragraph 2, Article 9, of the Administrative 
Measures, "an overseas shareholder of a joint venture fund management company shall have a 
minimum paid-up capital in convertible currency equal to RMB 300 million".  Meanwhile, according 
to Article 13 of the Securities Investment Fund Law  promulgated on 28 October 2003, the main 
shareholders of a fund management company were required to "have no less than RMB 300 million registered capital".  He added that all those require ments were stipulated in laws and regulations, and 
China did not have any plan to modify these provi sions.  In China's view, these requirements were 
prudential measures for the regulation of the fina ncial sector, consistent with the GATS, with 
paragraph 214 of the Working Party Report, and with China's commitments.   S/FIN/M/50 
 Page 5 
 
 
28. As one of the measures to fulfill China's WT O commitments, the CSRC had promulgated the 
Rules on the Establishment of Securities Companies with Foreign Shareholding  on 1 June 2002 to set 
forth the rules for the establishment and operation of joint-venture securities comp anies.  According to 
those rules and other relevant la ws and regulations, 4 joint-vent ure securities companies had been 
licensed by the CSRC as of August 2005, with a to tal capital investment of over RMB 1 billion Yuan.  
In line with China's WTO commitmen ts, the business scope of those join t-ventures was the following:  
(i) underwriting of stocks (including A, B and H shares) and bonds (inc luding government and 
corporate bonds);  (ii) brokerage business in B and H shares;  (iii) brokerage and proprietary trading 
of bonds (including government and corporate bonds );  and (iv) other business approved by the 
CSRC.  
29. Up to now, China's WTO commitments in relatio n to the securities industry had been fully 
fulfilled.  Currently, joint-venture securities firms c ould engage only in the businesses stipulated in his 
response.  As securities companies in  China were in the process of r ectification, China would, subject 
to the progress and outcome of the rectification, study the possibility of broadening the joint-venture 
securities firms' business scope.  
30. In the case of insurance services, foreign-funded non-life insurers  were currently allowed to 
operate in the form of branches and subsidiaries in China;  the detailed requirements were provided in 
the relevant regulations and according to China's commitments.  
31. The branches of an insurance company were permitted to establish sub-branches within the 
business territory of the branches.  This was also  true for non-life insurers.  The conditions and 
procedures for the establishment of branches, as well  as other initial establishment requirements, were 
included in the Regulations on the Administration of Insurance Companies , the Regulation on the 
Administration of Foreign-Invested Insurance Companies  and its Implementing Rules by CIRC, to 
which Members might refer to.  Answers to questions on additional capital requirements for 
additional branch establishments could also be found  in those three regulations.  China believed these 
requirements were based on prudential considerations  and were not against the GATS.  He added that 
the CIRC carried out approval and examination procedures of those businesses on the basis of 
national treatment and following the principle of prudence.  
32. The representative of China said he was not sure  that the questions on the amendment of the 
Insurance Law were directly linked to China's commitments.  However, he confirmed that the 
amendment process was open and transparent.  Th e CIRC had collected comments from interested 
parties, including foreign insurance companies.  The amendment was still under way and he hoped he 
could update Members of further developments in the future.  
33. In the case of group life coverage, issues relate d to business scope were administered strictly 
in accordance with the commitments at the WTO.  He requested Members to refer to the relevant 
regulations and commitments.  
34. Replying to the questions on the conditions for insurance companies' assets to be invested 
abroad, he requested Members to refer to the Provisional Measures on the Administration of the 
Overseas Utilization of Insurance Foreign Exchange Fund  and its detailed implementing rules.  As to 
the establishment of insurance assets management companies, he asked Members to refer to the 
Interim Regulations for Insurance Assets Management Companies , as well as to the provisional 
measures and detailed implementing rules.  He reite rated that China's requirements for insurers to 
invest foreign exchange funds as well as those for the establishment of insu rance asset management 
companies, complied with the principles of prudential regulation and supervision, and national 
treatment.  
35. Finally, on the questions regarding the pension sector , the representative of China said that 
the enterprise annuities market was still at its pre liminary stage and the enterprise annuity itself was S/FIN/M/50 
Page 6  
 
also a new concept in China.  At present, the de fined contribution plan under trust basis was permitted 
in China and the relevant regulations were the Provisional Measures on Enterprise Annuities  and the 
Provisional Measures on the En terprise Annuities Fund Management .  He added that the process for 
application and approval of enterprise annu ities fund management was provided in the Provisional 
Measures on the Qualification Accreditation for En terprise Annuities Fund Management Institutions .  
36. The representative of Canada
 drew Members' attention to a written communication that his 
country had just been submitted for circulation to Me mbers.  Due to the lateness of this submission, 
he requested that responses be provided at the next  meeting.  He nevertheless highlighted the main 
elements of Canada's submission.  A point that ha d been raised by some Members previously - the 
ability of foreign-invested insurance joint ventures to  expand on an equal foot ing with domestic firms 
- concerned an important commitment that China was to implement by end 2004.  However,  
approvals for new branches and sales offices of forei gn invested insurance joint ventures continued to 
lag compared to the speed at which domestic insu rance firms were permitted to expand.  Foreign 
banks continued to face limits on access to foreign currency funds  from abroad, artificially capping 
their lending portfolios.  Canada hoped that this sy stem would be revised to allow greater flexibility 
for foreign banks to expand their lending business in China.   
37. He also referred to Article 30 of the CBRC Ad ministrative Regulations on Foreign Invested 
Financial Institutions which required that the valu e of a foreign bank is foreign currency deposits 
received did not exceed 70 per cent of the value of  its foreign currency assets within China.  In 
essence, a foreign bank could only fund up to 70 per cen t of its foreign currency loans with funds 
deposited in China, and at least 30 per cent of its loan funding must be from abroad.  This requirement 
limited the ability of foreign banks to lend foreign currency without bringing it in from abroad.  He 
asked whether the CBRC had establishe d a timeframe for reviewing and eventually eliminating the 70 
per cent rule given that it seemed to run counter  to the purpose of the foreign exchange borrowing 
quotas administered by the State Administration of Foreign Exchange (SAFE) and the National Development and Reform Commission (NDRC).   
38. The representative of th e European Communities
 took note of China's explanation of its 
capital requirements, but called for a significant re duction of these requirements, which were still very 
high by international standards and in comparison  with other countries.  He also expressed the 
European Communities' concerns about China's regi me for the regulation of suppliers of financial 
information and data processing services.  Additiona lly, while taking note of the explanation provided 
by China on the 20 and 25 per cent caps on foreign equity in banking institutions, the European 
Communities remained concerned about this issue a nd urged China to be more flexible and loosen 
such restrictions.  
39. The representative of the United States  said that the transitional review mechanism continued 
to be very useful, particularly in areas like financial services where China was still phasing in its 
commitments.  The TRM allowed Members to seek clarifications regarding policies and practices, and 
thus promoted a fundamental concept of transpar ency.  The TRM also provided a forum for Members 
to convey their expectations regarding the implemen tation by China of its accession commitments.  In 
turn, the TRM allowed China to explain its policies and practices and prevent misunderstandings that 
could lead to trade frictions.  
40. The questions raised by the United States in its communication covered insurance, banking, 
securities, pensions and financial information services.  In the ar ea of insurance, the United States 
welcomed the actions taken by China in the last year in removing geographic restrictions and most 
business scope restrictions as of 11 September 2004.  He also welcomed the regulations and rules 
issued to facilitate the implementation of commitme nts.  China's insurance commitments held great 
promise for foreign insurers.  Nearly 40 foreig n insurers, many of them American, were now 
operating in China.  Foreign insurers had less than 3 percent of market share in  China, but they were 
gaining ground.  Increased competition should benefit consumers.  In its questions on insurance, the  S/FIN/M/50 
 Page 7 
 
 
United States focused, first, on the ability of fore ign insurers to extend their business geographically 
through branch and sub-branch expansion.  The questions also focused on capital requirements and 
the status of various planned measures, such as the draft Insurance Law.  However, with regard to 
many questions in the insurance area, the response th at the United States seemed to receive was that it 
should look at China's commitments and at the regulations that China had issued.  The written 
questions had been submitted precisely because the United States had already checked those sources 
and still had issues on which further clarification was sought.  
41. In section 1, subparagraphs (a), (b), and (d) of its submission, the United States asked for 
confirmation of its understanding of certain issues.  In question 1(c) , the United States noted that 
foreign insurers were being granted branch appr ovals consecutively, while domestic insurers seemed 
to receive concurrent approvals for their applications.  That differential treatment raised concerns for 
the United States.  With regard to  foreign insurers interested in providing group licence coverage, the 
United States wanted to know when the Chinese Regulatory Authority was planning to provide implementing guidelines.  In his view, this question had not been answered.   
42. Questions 5 and 6 dealt with the limitations on the insurers' ability to invest their foreign 
exchange funds in overseas funds or equities, which, as mentioned by China in last year's TRM, 
applied to both domestic and foreign insure rs.  The question was how China justified the 
disproportionate impact of this requirement, give n that the level of assets necessary to qualify could 
be realistically met only by domestic insurers.  Si milarly, while the interim regulations for insurance 
asset management companies applied to both domestic and foreign insurers, there was a disproportionate impact given that insurers must have held licences for more than 8 years prior to 
applying.  He added that the United States had a useful bilateral dialogue with China on insurance 
issues, and would try to follow up on many of th ese questions, as well as on other questions, in the 
framework of that dialogue.  
43. In the banking area, the United States had two areas of inquiry.  One referred to capital 
requirements and had been reiterated by other Member s;  and the other referred to China's Accession 
Protocol commitments regarding Chinese foreign joint banks.  In his view, according to China's 
regulations, foreign investor ownership could not  exceed 25 per cent, wher eas in China's services 
schedule there was no limitation on the percentage of foreign ownership.  He wondered how this 
could be justified in light of China's services schedul e.  He said that he did not obtain an answer to 
that question.  As regards securities services, th e questions focused on capital requirements and the 
nature of the services that the Chinese regulatory au thorities had allowed foreign enterprises to engage 
in. 
44. In the area of pensions, the United States was seeking clarifications regarding the licensing 
process for companies intending to offer pension annuity  services.  He did not register an answer to 
those questions either.  He also said that the Ministry of Labour and Social Security (MOLSS) had reportedly stopped accepting applications for enterp rise pension funds, and the United States would 
like to know when applications would start being acce pted again, and whether or not the authority was 
interested in instituting a rolling application process.  
45. The last set of questions raised by the United States in its submission dealt with the provision 
of financial information services.  There were con cerns in this area because Xinhua acted both as the 
regulator and the major competitor of foreign financ ial information service providers in China; while 
in its Accession Protocol China had committed to create an independent regulator.   
46. The representative of Australia
 also recognised that the review  was a valuable mechanism for 
the transparent implementation of China's financial services commitments.  Australia acknowledged the considerable progress made by China in impl ementing its WTO commitments in the financial 
services sector and in its economic reform progra mme in general.  The competitive stimulus and S/FIN/M/50 
Page 8  
 
enhanced efficiency that had accompanied the liberali zation of China's financia l sector would prove to 
be an important contribution to future growth in the sector and the economy in general.   
47. Australia noted the answers in cluded in China's statement.  However, he sought further 
clarification since he was unable to detect respon ses to a number of Australia's questions, which were 
in fact very similar to some of the questions submitted by other Members.  In banking, Australia 
looked forward to answers to its specific questi ons on the limitations imposed on foreign banks' 
access to off-shore borrowing, and on the limitations on foreign equity ownership.  In insurance, he 
asked whether an indication could be given as to when implementing measures would be issued by 
the China Insurance Regulatory Commission to prov ide specific guidelines and approval criteria for 
foreign insurers interested in providing group life,  health, pension and annuity services so as to give 
effect to China's commitments regarding those services.   
48. The representative of Chinese Taipei
 noted that some of his delegation's questions had also 
been addressed in the explanati ons provided by the Chinese delega tion.  Chinese Taipei recognised 
China's efforts to improve its business environmen t in its implementation of WTO commitments over 
the past few years with the aim of further integra ting into the global economy.  Chinese Taipei looked 
forward to China's continuous efforts to further deregulate its market access for financial services. 
49. The representative of Switzerland  said that one major problem faced by Swiss banks was the 
remaining barrier imposed by capital requirements fo r foreign bank entry into the Chinese market.  He 
was well aware that this topic had already been ra ised by the Chinese delegation in their introductory 
remarks.   Switzerland would be very grateful if China could in future provide more information on 
plans to further liberalize capital requirements fo r foreign bank entities.  Switzerland supported the 
statements by the European Communities and the Un ited States regarding the limitations on foreign 
participation in financial institutions.  In his view, allowing a 25 percent participation was not 
sufficient.  Switzerland was interested in knowing if there were any plans to ra ise these limits in the 
future in order to allow majority or even 100 per cent foreign participation.  
50. The representative of Japan  said that as recently forecasted by  the OECD, China was likely to 
be the world's biggest exporter and the fourth larg est economy by 2010.  He encouraged China to 
continue its efforts to liberalize the economy, and in particular the financial se ctor.  He reiterated that, 
regulatory transparency and consistency in implemen ting regulations were as im portant as individual 
liberalization measures.  
51. The representative of China  thanked Members for the follow up questions.  He was surprised, 
however, by the questions regarding minimum capita l requirements since China had given a complete 
explanation.  He added that he would be willing to discuss the issue of international standards with 
interested Members after this meeting.  Chin a was not the only country imposing minimum capital 
requirements.  Noting that some Members welcomed  the bilateral dialogues with China on insurance 
services, he considered it advisable  to deepen these dialogu es because the topic was very technical to 
be discussed in detail at this occasion.  Regarding the questions raised by Australia, the representative 
of China said that since these had been received at a late stage in the process, it was impossible to 
refer back to experts in capital, most of whom  were concentrating on the preparations for the 
December Ministerial Meeting in Hong Kong, China.   He added that he had no further replies to 
provide at that time.    
52. By way of conclusion, the Chairperson  invited the Committee to take note of all the 
statements made.  Secondly, he requested the Secret ariat to prepare a report, to be presented to the 
Council for Trade in Services.  It would be a factual report, stating basically that:  
(a) pursuant to section 18 of the Protocol on the Accession of the People's Republic of 
China, the Committee had conducted a review of the implementation by China of the  S/FIN/M/50 
 Page 9 
 
 
WTO Agreement and of related provisions of the said Protocol, in the meeting held 
on 19 September 2005;  
(b) written communications had been received from five Members, namely the European 
Communities, the United States, Japan, Chinese Taipei, and Australia;  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/50. 
53. The representative of Canada  requested that a reference to his country's communication be 
included in the report.   
54. The representative of China  said, for the sake of the record, th at the hard copy of Australia's 
questions had actually been received in the morning of the day of the meeting;  this explained why 
China had no time to prepare replies.  The same applied to the questions from Canada.  
55. The Chairperson  suggested that this be reflected in an  appropriate manner in the report.  The 
Committee so decided .  
C. ACCEPTANCE OF THE FIFTH PROTOCOL TO THE GENERAL AGREEMENT ON TRADE IN 
SERVICES EMBODYING THE RESULTS OF THE FINANCIAL SERVICES NEGOTIATIONS  
56. The Chairperson  recalled that three WTO Members had yet to accept the Fifth Protocol:  
Brazil, Jamaica, and the Philippines.  He invited these Members to provide information on the status 
of their domestic processes. 
57. The representative of Brazil  said that the ratification of the Protocol was following due 
legislative process and it was impossible to indicate at this stage when that could be finalized.  
58. The representative of the Philippines  said that the situation had not changed since the last 
report made to the Committee, and it was not possi ble to indicate a definite timeframe for the 
acceptance of the Protocol.    
59. The representative of the United States  expressed her country's concern that the three 
Members had yet to accept the Protocol.  She expr essed the hope that more positive news could be 
heard at the next meeting.  
60. The representative of Japan  expressed his disappointment that  these three Members had yet to 
ratify the Protocol.  He encouraged them to make substantial progress by the next Ministerial 
Conference in Hong Kong, China.  
61. The representative of the European Communities  encouraged the three Members to provide 
more detailed information on the status of the acceptance procedures as soon as possible.  
62. The representative of Norway  regretted that the item had still to be included in the agenda.  
He encouraged the three Members to make progress before the Ministerial Conference. 
63. The Chairperson  said that no new information had been received on the status of domestic 
procedures in these Members, since a concrete date for their acceptance of the Protocol could not be 
envisaged.  Some delegations had expressed their con cern about this matter.  He encouraged the three 
Members concerned to accelerate the internal pro cedures for the acceptance of the Protocol and to 
keep the Committee informed  of any progress.   S/FIN/M/50 
Page 10  
 
64. The Committee took note
 of the statements made and decided  to revert to this agenda item at 
the next meeting. 
D. TECHNICAL ISSUES  
65. The Chairperson  recalled that as he had indicated at the end of the discussion on organization 
of future work at the previous meeting, th e Committee would address again the communication from 
Brazil on electronic commerce and financial services (JOB(05)/103) in order to allow Members to 
make further comments if necessary.  He also recal led that he had endeavoured to hold informal 
consultations on two suggestions made at the last m eeting, namely to request the Secretariat to update 
a previous note on the distinction between modes 1 and 2, and to invite representatives from the Basel 
Committee on Banking Supervision and other relevant  international bodies to the Committee to share 
information regarding their work in this area.  In  the meantime, the Secretariat had circulated an 
informal note containing relevant submissions and meeting reports (Job(05)/155).  The outcome of the 
consultations was the following:  firstly, most Members did not consider it necessary to have an 
updated note by the Secretariat at this stage.  Some  of them would rather review previous discussions 
on this issue to see whether there might be a need for further information.  Secondly, there was no 
consensus at this stage to invite  representatives from the internationa l standard setting organizations.  
66. The representative of Brazil  expressed his concern about the difficulties some Members had 
with inviting the Basel Committee on Banking Supervis ion and other relevant organizations to share 
their expertise in the regulatory field.  This input would be important for both financial regulators and 
negotiators.  He reiterated his delegation's interest  in inviting those international organizations.  He 
requested the Chairperson to pursue his consultati ons on this matter, and encouraged the Members  
that had expressed difficulties to clearly indicate their concerns, instead of simply vetoing the 
proposal.   
67. The representative of Hong Kong, China  said that the communication raised two issues.  On 
the one hand, the regulatory concerns and challenges po sed by cross-border trade in financial services.  
In that regard, he supported the idea of inviting so me of the international standard setting bodies to 
share their experience and work in this field.  He reminded Members that those bodies had already 
come to the WTO, and a separate session had been or ganized with them.  That could be an example to 
follow.  He asked whether the Secretariat could prov ide further information in that regard.  The other 
issue raised by Brazil's communication was the distinc tion between modes 1 and 2.  In that regard, he 
considered that the informal note by the Secretariat was a useful tool to review previous discussions, 
which had not lead to any specific conclusion. Rather, the summary of opinions expressed was 
attached to the scheduling guidelines (S/L/92).  He w ondered to what extent this issue - the distinction 
between modes 1 and 2 - had created difficulties fo r individual Members to make commitments in 
financial services or, possibly other sectors.  There ha d been suggestions as to how this issue could be 
practically resolved and wondered to what extent Members would be able to move beyond what had 
been already been reflected in the previous su mmary of discussions.  The preference of Hong Kong, 
China was to have greater clarity and certainty than  what was provided by the summaries of previous 
discussions attached to the scheduli ng guidelines. He was also wary of the risk of spending too much 
time on a discussion that might not lead to a better  solution.  Given that the distinction between 
modes 1 and 2 was relevant for all services sectors, he  also wondered to what extent this issue should 
be taken up solely in this Committee.  Discussions  which concerned the implementation of the GATS 
itself, should perhaps be held in a broader forum,  such as the Council for Trade in Services.  He 
clarified that he was not making a suggestion, but just wanted to raise issues for Members to reflect 
upon when considering the communication from Brazil.   
68. The representative of the United States  said her country would have serious concerns about 
pursuing this debate any further.  As stated by  the representative from Hong Kong, China, Members 
had already traversed this issue before, and the Secr etariat had presented a Note to help Members in 
their thinking.  The debate had not prevented Members from making commitments on these two  S/FIN/M/50 
 Page 11 
 
 
modes of supply.  Since it was for individual Member s to place items on the agenda and for others to 
react, the presumption should not be created that Members had reached a consensus decision to enter 
into a debate over the Brazilian paper or the subjec t contained therein.  Although the United States 
had questions on the substantive issues raised in th e paper, it did not intend to pursue them at the 
moment.  She had no problem with a narrow consultation by the Chairperson to see what was causing 
discomfort to some delegations regarding the invi tation of international setting bodies or further 
exploration of the suggestion made by Hong Kong, Ch ina to find another format for such meetings.  
That did not mean, however, that she could suppor t another format, but was simply seeking further 
clarification from Brazil as to the exact  scope of the consultation proposed.  
69. The Chairperson  confirmed that no decision had been taken as to how to proceed with this 
issue.  Members were just debating about Brazil's submission.  
70. Responding to the query raised by Hong Kong, China, a representative of the Secretariat  said 
that in October 2001, upon the request of this Comm ittee, a seminar was held with the three standard 
setting organizations, to inform Members of their activities.  The preceding consultations took into account the concerns of some Member s, and the desire at the time w as to separate such  an event from 
the official work of the Committee.   It was therefore organized as a seminar, which was moderated by 
a representative of the Secretariat and not by th e Chairperson of the Committee.  That provided 
comfort to those Members who wanted to draw a distinction between an information-seeking event, 
such as a seminar, and the official  proceedings of the Committee.   
71. The representative of Brazil
 said that it was not his intention to oblige any Member to react to 
the issues raised in the communication.  The id ea was to share Brazil's concern as to how to 
distinguish between the two modes of supply when  making new commitments.  Brazil thought that a 
multilateral debate on that issue would be to the be nefit of all developing country Members.  This 
could be a good example of a multilateral approach  being used to comple ment the request-offer 
process, as stated in the negotiating guidelines and procedures.  He did not agree with the position 
advocated by Hong Kong, China that if a conclusive debate could not be reach ed, then an issue should 
not be taken up.  Brazil was not seeking a co nclusive agreement on whether modes 1 and 2 
overlapped, but was interest in exploring different views.  Regarding the query raised by the United 
States, he confirmed that Brazil was seeking a narro w consultation in relation to a potential invitation 
to international standard setting bodies to come to the Committee itself or to a more informal seminar 
at a time when regulators were in town.  He  added that Brazil was open to any option.   
72. The representative of Hong Kong, China  supported the idea of further consultations regarding 
the invitation of international standard setting bodies .  He clarified that Hong Kong, China attached 
importance to the issue and, as revealed by previ ous discussions, had been pressing for greater clarity 
on the distinction between modes 1 and 2.  The poi nt he had raised was rather whether further 
discussions would add value to what Members alread y had on the table, i.e. records of previous 
meetings, as well as summaries incorporated in th e scheduling guidelines.  Both the Note by the 
Secretariat and the summary of informal discussi ons that had been attached to the scheduling 
guidelines alluded to a number of options to clarif y the scope of modes 1 and 2.  The question was 
whether and to what extent Members would be able to move beyond what had already been discussed.  
Delegations should not spend their time on repeating previous discussions.  If Members were able to 
move closer to a common understanding on this i ssue, the second question was whether they might 
find the appropriate vehicle to reflect that understa nding.   These were practical issues that Hong 
Kong, China rose for Members to reflect upon.  
73. On the substance of the issue, a couple of sugg ested solutions deserved further attention.  The 
first one was to ensure that commitments on modes 1 and 2 be of the same leve l.  Another idea, which 
had not been really taken up in the discussion thus fa r, was to draw a distinction on the basis of where 
the service was being delivered.  That would imply looking also at the place where the consumer was 
physically present, since services would be tangibly consumed by the consumer on the spot due to the S/FIN/M/50 
Page 12  
 
nature of services.  To the extent that these ideas could help clarify the distinction between modes 1 
and 2, Hong Kong, China would be willing to pu rsue discussions in the Committee or in other 
appropriate forum.   
74. The representative of China
 supported the idea of having another seminar similar to the one 
held in October 2001. 
75. The Chairperson  said that the suggestion was made to pursue  informal consultations on the 
suitable format for the invitation of international st andard setting organizations.  In that regard, he 
proposed to have bilateral consulta tions with interested Members first, in order to get a sense of the 
different views.  If he saw a chance to develop a consensus among the most interested delegations, 
then he would consider to have a broader consultation with a view to  bring this issue again into the 
Committee.  The Committee so agreed . 
76. The Committee took note  of the statements made, agreed  to the suggestion made by the 
Chairperson, and decided  to revert to this agenda item at the next meeting.  
E. RECENT DEVELOPMENTS IN FINANCIAL SERVICES TRADE  
77. The Chairperson  said that, as indicated in the airgra m, a representative of the China Banking 
Regulatory Commission would make a presentation on the regulation and supervision of China's 
banking sector.  The presentation would be made by  Mr. Deng Hongguo, Deputy Director-General of 
the Banking Supervision Department.  
78. The representative of China , Mr Deng Hongguo, said that his presentation would focus on the 
development of reform, opening up and supervisi on of the Chinese banking sector.  He started by 
providing an overview of the sector.  Since China had initiated reform and opening-up more than 20 
years ago, its banking sector had been growing ra pidly. As of en d 2004, the assets of the banking 
institutions totaled RMB 31.6 trillion (equivalent to  about US$3.8 trillion), 116 times higher than the 
level at the end of 1980.  At present, the banki ng sector accounted for about 90 per cent of total 
financial assets in China.  At the end of 2004, the banking system consis ted of some 35,000 banking 
institutions, including 4 state-owned commercial banks (SOCBs), 3 policy banks, 12 joint-stock 
commercial banks (JSCBs), 4 asset management co mpanies (AMCs), 112 city commercial banks, 211 
foreign bank branches and subsidiaries, 223 fo reign bank representative offices, 681 urban credit 
cooperatives, 33,135 rural credit cooperatives (RCCs) , some non-banking financial institutions (e.g., 
trust and investment companies, finance companie s, financial leasing companies, auto financing 
companies), and numerous postal saving institutions.  
79. China's banking sector was facing many challenges.  First, the proportion of non-performing 
loans (NPL) of Chinese local banks needed to be further reduced.  The average NPL ratio of the 4 
State-owned commercial banks and the 12 Joint-Stoc k commercial banks was as high as 25 per cent a 
few years ago.  Great efforts had been made in recent years to address the problem. Four asset 
management companies had been est ablished in 1999 to deal with RMB 1.3 trillion worth of NPLs 
from the 4 State-owned commercial banks.  Local ba nks had also taken various measures to recover 
their NPLs and write off loses.  However, as of end 2004, the NPLs of the 4 State-owned commercial 
banks and the 12 Joint-Stock commercial banks stoo d as high as RMB 1.7 trillion.  The average NPL 
ratio had dropped to 13.2 per cent, s till 8 percentage points higher than  the average level of the world 
top 100 banks.   
80. Secondly, local banks were in an urgent n eed to improve their corporate governance and 
operational mechanisms.  There were deficiencies in  areas such as decision-making, internal controls 
and risk management, incentives, innovation capaciti es, and human resources.  They had low returns 
on assets (ROA) and returns on Equity (ROE), indicati ng their poor profitability.  All this put local  S/FIN/M/50 
 Page 13 
 
 
banks at a disadvantage against world advanced banks,  and exposed them to even greater pressure in 
an increasingly competitive environment.  
81. Since its establishment in April 2003, the CBRC ha d put priority on the reform of SOCBs and 
the RCCs.  He wanted to focus on the reform of the 4 SOCBs.  They had long been serving as a fund 
supplier for the country's economy, although they had lo st market share in the last twenty years.  As 
of end 2004, total assets of SOCBs reached RMB 16.9 trillion.  Given their important role in China's 
banking sector, the 4 SOCBs needed to restore co mpetitiveness by further deepening reform and 
restructuring.  The Chinese government had thus de cided at the end of 2003, to select the Bank of 
China and China Construction Bank as partners fo r the new round of reform, and injected US$45 
billion to improve their capital base.   
82. The reform consisted of three phases: financial r estructuring to deal with NPLs;  reform in 
corporate governance;  and going public in capital ma rkets.  So far, the reform had achieved staged 
success.  After two banks had completed their financial restructuring, their asset quality had been notably improved and their balance sheet had been s ubstantially strengthened.  At the end of 2003, the 
average NPL ratio of the 4 SOCBs had stood at 20 per cent as measured under the five-category loan 
classification system, and their average Capita l Adequacy Ratio (CAR) had been as low as 
4.61 per cent; whereas at the end of 2004, the NPL ratios of the BOC and the CCB dropped to 
5.7 per cent and 3.8 per cent respectively, and their CARs had risen to 9.7 pe r cent and 11.97 per cent, 
respectively.  
83. China's banking sector had been opened since 1979.  After its accession to the WTO, China 
had been proceeding with the further open-up in  accordance with WTO principles and China’s WTO 
commitments.  The main polices were as follows:  no restrictions in terms of geographic coverage and 
clients for foreign currency business;  18 citi es, including Shanghai, Shenzhen, Beijing, and 
Chongqing, as well as services for Chinese enterprises, had been opened for lo cal currency business;  
and motor vehicle financing by foreign non-bank ing institutions had also been allowed.  
84. As of end July 2005, 68 foreign banks fro m 19 countries and regions had established 227 
operational institutions, 50 more than that at th e end of 2001 when China had joined the WTO.  
Meanwhile, 174 foreign banks from 41 countries and regions had established 238 representative 
offices. The assets of foreign banks in China amounted  to US$79.3 billion, 54 per cent more than at 
the end of 2001, with an 18 per cent annual grow th rate, and their RMB assets had risen to RMB 
150 billion, 1.5 times that of the end of 2001, with annual growth of 43 per cent.  Outstanding loans 
by foreign banks totalled US$41.34 billion.  Fore ign banks’ NPL ratio stood at a low level of 
1.05 per cent.  The business scope of foreign banks ha d also been expanded. So  far, 133 foreign banks 
had been authorized to conduct RMB business, 73 of which had been permitted to provide RMB 
services for Chinese enterprises. Fifteen foreign banks had been authorized to engage in Internet 
banking business in China, 41 in derivatives activiti es, and 5 in Qualified Foreign Institutional 
Investors (QFII) custodian service. Altogether, fore ign banks were now able to offer over one hundred 
types of products and services in China, more th an 3 times more than that of local banks. 
85. Rapid development of foreign banks also rev ealed certain problems. In respect of their 
operations and management, some  foreign banks were using less prudential assets classification 
system, some branches saw the decrease of their actual operational capital and potential liquidity 
risks, and the average ROA of the foreign banks in China stayed at 0.41 per cent while that of the 
world top 100 banks is  one per cent. In addition, the management and staff training of some foreign 
banks failed to keep pace with their business development. Some banks even conducted non-
prudential operations that led to the loss of cons umers in fierce competition.  All this brought about 
new challenges to banking supervision. 
86. He finally turned to issues related to banking  supervision in China.  In April 2003, the 
Chinese government had initiated a major reform of its financial supervision regime, under which the S/FIN/M/50 
Page 14  
 
CBRC had been established, putting in place a supe rvisory framework where banking, securities and 
insurance services were subject to th ree separate regulators.  He focused on four main issues.  First, 
clear supervisory concepts had been set out.  Up on its establishment, the CBRC had introduced 4 new 
supervisory concepts:  consolidated supervision of each banking institution;  strengthening of internal 
controls in banking institutions;  enhancing supervisory transparency ;  and staying focused on risk-
based supervision.   
87. Second, banking legislation had been improved.  The Law of the People’s Republic of China 
on Banking Regulation and Supervision  entered into effect on 1 February 2004. It embodied, to a 
large extent, the concepts of the Core Principles for Effective Banking Supervision  issued by Basel 
Committee.  Moreover, the legal framework was tryi ng to apply the principle of national treatment. 
For example, the Regulation Governing Capital Adequacy of Commercial Banks , the Provisional 
Administrative Rules Governing Derivatives Activities of Financial Institutions , the Provisional Rules 
on the Pricing of Services by Commercial Banks  and the Administrative Rules Governing the Auto 
Financing Company  all granted the same treatment to local and foreign banks in China.  Finally, the 
legal framework was built up for prudential and risk-fo cused supervision with a view to encouraging 
innovations and setting professional licensing requirement s and supervisory controls. In this respect, 
the CBRC issued a range of rules and regulations to address credit risks, market risks, capital 
adequacy management and new businesses of co mmercial banks, through which the supervisory 
measures are further improved.  
88. Third, international cooperation had been enhanced.  The CBRC had been established cross-
border supervisory cooperation mech anisms with overseas counterparts.  So far, the CBRC had signed 
Memorandums of Understanding with the banking s upervisory authorities of the US, UK, Korea, 
Singapore, Canada and others.  Re gular meetings with Canadian and Japanese authorities had been 
arranged.  Moreover, the CBRC had set up a Counc il of International Advisers, composed of 
internationally-known banking speci alists who have provided a great deal of good advice, ideas and 
recommendations. The CBRC also conducted a self- assessment on the complia nce of the Chinese 
banking supervisory and re gulatory regimes and practices against Basle Core Principles for Effective 
Banking Supervision.  Based on assessment findings, it had formulated an action plan for further improvement.  
89. Despite the achievements made, the authorities were fully aware of the gap between the 
CBRC and its counterparts in developed countries in te rms of supervisory level, capacity, concepts as 
well as supervisory mechanisms, measures and skills.  First, many international best practices and 
standards in banking supervision had not been intro duced to China until several years ago.  Examples 
were: five-category loan classifica tion in 1998, application of loan  loss provisioning in 2002, and 
prudential capital adequacy ration (CAR) management  in 2005.  Secondly, supervisory measures on 
new financial instruments and products, such as in ternet banking business and derivatives, still lagged 
behind the fast market developments.  Third, Chin a also faced the challenges posed by Basel II.  
90. Summing up, he said that China had made subs tantial commitments in the WTO.  China’s 
accession had brought challenges and pressures to th e banking sector and banking supervision. This 
was mainly because the sector still lagged behind developed countries' banking sectors in terms of 
maturity, competitiveness and regula tory framework.  Such gaps c ould hardly be narrowed in the 
short run.  China had been carrying out its WTO oblig ations in strict compliance.  It was imperative 
for local banks to enhance their competitiveness th rough further reform.  Otherwise, the already 
existing gap with foreign competitors would be widened and the development of China’s banking 
sector as a whole be slowed down.  
91. The Chinese banking sector was becoming more market-oriented and internationalized.  
China would continue to honor its WTO commitm ents and attach equal importance to banking 
supervision and banking development.  Keepi ng an eye on supervision, opening-up and innovation 
with advanced concepts, mechanisms and m easures, the CBRC would continuously strengthen  S/FIN/M/50 
 Page 15 
 
 
banking supervision, guard against and mitigate risk s, so as to ensure the safe and sound operation of 
China's banking sector.  
92. The representative of Pakistan  noted that while there were no geographic restrictions for 
foreign currency business, only 18 cities had been ope ned so far for business in local currency.  She 
asked what the experience had been and whether Ch ina was thinking about extending this to other 
cities in China.   
93. The representative of the European Communities  said that the presentation had clarified the 
challenges that China was facing in opening up it s banking sector.  He added that China and the 
European Union had also established a regulatory dialogue, which was still in the initial stages, but 
could hopefully be very productive for both parties.   
94. The representative of the United States  sought further clarification regarding the timing of the 
three stages of the reform process:  financial r estructuring, corporate governance reform, and going 
public in capital markets.  
95. The Chairperson  noted that the OECD had recently published a report on China, and one 
chapter of which had been devoted to reform in the financial sector.  One suggestion made by the 
OECD was that China change its rules concerni ng managing boards in banks, and allow more 
foreigners to take part in those boards.   
96. The representative of China , Mr Deng Hongguo, said that the financial sector had been 
opened step-by-step, the banking sector since 1979.  At  that time, foreign banks offered their services 
to foreign-invested enterprises.  Foreign currency business had used to be the major part of their 
business for more than 20 years, until local currenc y business had been opened to foreign banks.  
According to its WTO commitments, China would ease its geographic limitations step-by-step.  So 
far, 18 cities had been opened for foreign banks to  conduct local currency business.  Two of those 
cities – Shenyang and Xi'an – had been opened two y ears before the commitment.  By the end of next 
year, all geographic limitations on local currency business would be eliminated according to the 
commitments.   
97. He added that there was no concrete timetable for the reform process.  Three of the SOCBs 
were in the process of reform, two of them had just finished the process of financial restructuring, and 
the fourth one, the Industrial and Commercial bank of  China, had just entered the phase of financial 
restructuring.  He also said that foreign banks we re allowed to invest in existing Chinese banks, and 
foreigners could also be part of the senior mana gement of local banks.  For example, the CEO of 
Shenzhen Development Bank w as an American citizen.   
98. He finally turned to some of the questions raised at the TRM on China's working capital 
requirements.  He said that there was no universal st andard available so far.  In some of the less 
developed countries, the working capital was much highe r than in China.  The same was true for some 
OECD countries.  While most European countries ha d lower capital requirements than China, that 
was not the case for other countries.  In decidi ng on the level of capital requirements, the major 
problem to consider was the risk faced by fore ign banks, which depended mainly on their business 
scope.  For example, some developed countries did not allow foreign banks to conduct retail business, 
but China did.  That meant that China, as a bi g developing country with less developed financial 
markets, was more open in some areas than so me developed countries.  When comparing capital 
levels in different countries, the business scope and the risk faced by foreign banks had to be taken 
into consideration.   As of end 2003, China had redu ced and simplified the criter ia for capital levels.  
He added that China would review the need for future  adjustments in the light of developments in the 
banking market and the risks faced by foreign banks.    S/FIN/M/50 
Page 16  
 
99. The Committee took note
 of the statements made and decided  to revert to this agenda item at 
the next meeting. 
F. DATE OF THE NEXT MEETING  
100. The Chairperson  suggested that the Committee hold its next meeting during the next cluster 
of services meetings.  The exact date would be announced in due course.   
101. The Committee so agreed . 
 
__________