RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/72 
23 October 2009 
 
 (09-5262) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM THE UNITED STATES 
 
Transitional Review Mechanism pursuant to Paragraph 18 of
 
the Protocol of the Accession of the People’s Republic of China  
 
Questions and Comments of the United States on the Implementation by China  
of its Commitments on Trade in Financial Services  
   The following communication, dated 21 October 2009, from the delegation of 
the United States, is being circulated to the Members of the Committee on Trade in Financial 
Services. 
 
_______________ 
 
 I. INSURANCE SERVICES 
1. The United States notes that as of 1 October 2009, in tandem with the entry into force of 
China’s amended Insurance law, China implemented the new Measures on the Administration of 
Insurance Companies , including procedures for branch and sub-branch approvals that the China 
Insurance Regulatory Commission (CIRC) will follo w. The United States appreciates that China 
provided advance notice and comment opportunities on the draft of this measure and made 
improvements before the measure became final.  Wi th regard to this measure, the United States would 
find it helpful if CIRC could clarify how it intends to interpret the provisions relating to approval 
authorities.    
2. On a related issue, the United States remains concerned that CIRC has not consistently met its 
own regulatory deadlines for reviewing and approvi ng internal branch applications from foreign 
companies, including for applications for consecutive (i.e., one at a time) branches.  The United States 
is also concerned that foreign life and non-life in surance subsidiaries estab lished in China may not 
apply for multiple, concurrent approva ls to expand through internal branches, but are instead limited 
to applying for and obtaining consecutive approvals.  This practice is inconsistent with China’s own 
regulations, which allow for multiple , concurrent applications and a pprovals.  In contrast, established 
and start-up Chinese insurers may apply for and do r eceive multiple, concurrent approvals to establish 
internal branches. 
(a) It would appear that, under Article 70 of the Measures on Administration of 
Insurance Companies , CIRC as a helpful step intends for both domestic and foreign 
companies to apply to the appropriate CIRC local level authority for approvals of new 
branches and sub-branches.  Can China confirm this interpretation? 
(b) Can China confirm that it will work exped itiously through its backlog of branch and 
sub-branch approval requests that accumulate d while it was finalizing the final details 
of its new measure? S/FIN/W/72 
Page 2  
 
  (c) Can China confirm that it will fully impl ement its own regulations regarding internal 
branching both in regard to consecutiv e and concurrent branch applications? 
(d) Please explain how China justifies any delays  or different treatment in branch or sub-
branch approvals in light of China’s WTO national treatment commitments.   
3. Non-life insurance companies have not been able to obtain approval to supply political risk 
insurance.  Can China confirm that CIRC w ill meet China’s WTO commitments by approving 
applications from non-life insurance companies to supply political risk insurance?   
 4. The United States seeks additional clarifica tions from China regarding the operations of 
China Post as a provider or distributor of insu rance services and its anticipated treatment under 
Chinese law in comparison with other suppliers of insurance services.     
  
 (a) The United States appreciated China’s clarifications during last year’s transitional 
review before this Committee that the Chin a Post Life Insurance Company has been 
approved but not yet established.  Has China Post Life Insurance Company now been 
established? 
(b)   Is CIRC the primary regulator of the China Post Life Insurance Company?  Will any 
other government bodies have additional regulatory oversight of that entity? 
(c) Can China confirm that its regulatory authorities are applying the same regulatory 
requirements to the new China Post insura nce entity as to any other supplier of 
insurance?   
(d) The United States understands that the Chin a Post Life Insurance Company is mainly 
targeting farmers and low-income urban residents as customers through the sale of very basic life insurance products.  Is that correct?  Please explain. 
(e) The United States understands that the China Post Life Insurance Company has 
invited private companies (including foreign companies) to distribute their products 
through the China Post insurance network.  What procedures should a private 
company follow if it is interested in dist ributing its products through this network?  
How many domestic and foreign companies have been approved to engage in such 
distribution? 
5. The United States understands that CIRC’s “executive training rule” would require senior 
executives of insurance co mpanies, including those based in ot her countries, to spend weeks in 
training that does not seem to have any bearing on their professional responsibilities, and that the new 
Insurance Association of China is involved in im plementation of this rule.  The United States notes 
China’s response from last year but  hopes that more flexible procedures can be developed.  Will 
China consider accepting credit for professional experience or certification gained elsewhere? 
6.   On 7 September 2009, CIRC made  available an updated draft of its Measures on Foreign 
Equity  for public comment.  The current draft is limi ted in scope to Chinese companies, defined as 
companies in which the foreign stake is less than 25 per cent.  However, the United States notes that 
China would apply different qualification standards to foreign investors than domestic investors, 
including a three year profitability requirement an d higher asset requirements for foreign investors.  
Can China explain the reason for these distinctions ?  Can China confirm that it will reconsider the 
need for such differences in treatment?  S/FIN/W/72 
 Page 3 
 
 
  7.   Can China please outline its current legal and regulatory requirements a pplicable to insurance 
companies that seek to manage their own assets or to outsource such management to other insurance 
or financial services companies?    How have guidelines by CIRC modified the Provisional Measures 
Governing Insurance Asset Management Companies ?  What requirements does a company currently 
have to meet in order to qualify as an asset manager for insurance companies? 
8.   The United States understands that CIRC ha s a strong interest in developing the group 
annuities sector (a type of private pension) and has st arted at least one pilot project to enable private 
companies to begin supplying such services.   However, currently, only Chinese domestic companies have been invited to participate in pilot projects.  Can CIRC confirm that foreign participation in pilot 
projects is permitted and announce procedures to enable access for fo reign companies?  
II. BANKING AND RELATED SERVICES 
9. The United States appreciates China’s previ ous responses to questions in several prior 
transitional reviews before this Committee on the matter of foreign investment in Chinese-funded 
financial institutions.  The United States seeks a dditional clarification as to whether any individual 
foreign institution is allowed to acquire more than  20 per cent, and whether multiple institutions are 
allowed to acquire more than 25 per cent, of th e equity of a Chinese-funded institution.  In 2007, 
China explained that the investment thresholds ar e merely criteria to determine the nature of a 
financial institution (i.e., Chinese -funded bank, joint venture bank or  foreign-invested bank) and, 
further, that if foreign investment in a Chin ese-funded firm exceeded 25 per cent, the Chinese-funded 
institution would then be regulated as a foreign-funded  financial institution.  China concluded that, in 
its view, there was no restriction on the equity investment level of foreign investment in a Chinese-
funded institution.  However, the regulations governing foreign ownership of Chinese-funded banks 
are unclear and, to the United States’ knowledge, fo reign-funded institutions have not been allowed to 
acquire equity stakes in a Chinese-funded bank beyond the 25 per cent threshold.  In view of China’s 
responses, we would ask China to respond to the following additional question. 
(a) Under the banking services section in th e GATS Schedule accompanying its Protocol 
of Accession, China committed to eliminat e, within five years, any existing non-
prudential measures restricting ownership, op eration, and juridical form of foreign 
financial institutions.  Chinese officials have  made public statements confirming that 
legally a Chinese-funded bank could be purchased by a foreign bank.  For example, it would be theoretically possible for a forei gn bank to buy 100 per cent of a city 
commercial bank.  Would China please clarify if any non-prudential restrictions 
remain in force for investment by fo reign-invested banks in Chinese-funded 
institutions?  Please also explain whether the Government of China, as a matter of 
policy, restricts such investment, and, if so, how such policies are consistent with China’s commitments under its GATS schedule. 
10. In the GATS Schedule accompanying its Prot ocol of Accession, China committed to allow 
unrestricted market access and national treatment for “payments and money transmission services, 
including credit, charge, and debit cards,” with this  commitment becoming effective with regard to the 
RMB business of retail clients no later than 11 December 2006.  China also committed to allow 
unrestricted market access and national treatment fo r “advisory, intermediation, and other auxiliary 
financial services” for other financial service s listed in its schedule, including payments.  
China’s GATS Schedule further provides for open market access for the “provision and transfer of 
financial information, and financia l data processing by supplier[s] of other financial services.”  During 
past transitional reviews before this Committee, China seemed to suggest that electronic payment 
services and related services were “settlement and clearing services for financial assets” and noted that China did not have GATS commitments in this area.  In response, the United States has explained 
that other Members, based on their general unders tanding of the definitions contained in the GATS S/FIN/W/72 
Page 4  
 
  Annex on Financial Servi ces, do not share China’s view of the relevance of “settlement and clearing 
services for financial assets,” which relate to i ssues such as securities settlement, to Members’ 
concerns relating to China’s policies regarding electronic payment services.  The United States has also urged, and continues to urge, China to a llow foreign electronic payment providers to begin 
processing electronic payment transactions in China a nd to ensure that foreign financial institutions 
can issue the payment cards of their choice (wheth er Chinese-, foreign- or co-branded) for domestic 
transactions. 
(a) Does China have any plans to begin allowing foreign electronic payment providers to 
process electronic payment transactions in Ch ina?  If so, please explain.  If not, why 
not? 
(b) How will China ensure that foreign financ ial institutions can issue the payment cards 
of their choice (whether Chinese-, foreign- or  co-branded) for domestic transactions?   
III. PENSIONS  
11. The United States is concerned that Chin a’s licensing system for “enterprise annuities” 
services, overseen by the Ministry of Human Resources and Social Security (MOHRSS), is closed.  
The United States urges China to re-open its ente rprise annuities licensing system and to remove 
quotas to enable all qualified firms to obtain licenses to provide enterprise annuities services. 
  
(a)   Please confirm that China intends to re-open its enterprise annuities licensing system 
in the near future. 
(b) Please confirm that China will maintain a level playing field among domestic and 
foreign banks, securities firms, asset management companies and insurers in the 
enterprise annuities services application and approval process.  
(c) Please confirm that review by functional regulators (i.e., CIRC, the China Banking 
Regulatory Commission (CBRC) and the China Securities Regulatory Commission (CSRC)) will not hold up a qualified application under MOHRSS licensing procedures.  
(d) Please confirm that MOHRSS licensing procedures will enable foreign and domestic 
companies to apply and be approved for the necessary licenses to supply enterprise annuities services.  
IV. TRANSPARENCY 
12. The United States appreciated the transparen cy-related information that China provided 
during last year’s transitional review before this  Committee.  However, the United States would find it 
helpful if China could provide additional inform ation.  The United States notes China’s recent 
decision to publish in advance for public comment, subject to specified exceptions, all trade and 
economic-related administrative regula tions and departmental rules th at are proposed for adoption and 
provide a public comment period of not less than  30 days from the date of publication.  China 
indicated that it would publish these proposed m easures on a single Chinese Government website 
maintained by the Legislative Affairs Office of th e State Council. Can China explain how this new 
system is operating in practice with  regard to proposed measures that  relate to financial services, 
including proposed measures from each of th e following agencies:  CIRC, CBRC, CSRC and 
MOHRSS?   S/FIN/W/72 
 Page 5 
 
 
  13. Please describe CSRC’s policy with regard to circulating proposed measures and providing 
opportunities for public comment.  Some recent pr oposed measures have only allowed periods as 
short as 7 or 14 days (rather than 30 days) for co mment, which is insufficient to allow interested 
parties to thoroughly review and comment.  Please  also explain how CSRC coordinates with other 
Chinese agencies when proposed measures invol ve more than one regulatory agency.  
 
 
__________