RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/59 
22 October 2007 
 
 (07-4558) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM THE EUROPEAN COMMUNITIES 
 
Transitional Review Mechanism Pu rsuant to Paragraph 18 of 
 
the Protocol of Accession of the People's Republic of China ("China")  
 
 
 The following communication, dated 19 October 2007, from the delegation of the European Communities, is being circulated to the Members of the Committee on Trade in Financial Services. 
 
_______________ 
 
 
1. The EC is transmitting comments and questions in advance of the meeting of the Committee 
on Trade in Financial Services of 12 November 2007, in order for the Chinese authorities to have sufficient time to provide complete replies. 
2. Once the information to be provided by China in accordance with paragraph 18 and 
paragraph V of Annex 1A of its A ccession Protocol has been received, the EC might come back with 
additional questions. 
3. The EC welcomes the adoption of the Regulation on the Administration of Foreign-Funded 
Banks , in particular the possibility for foreign banks to  incorporate as subsidiaries.  The EC hopes that 
China will provide full national treatment in line with its WTO commitments, and that the 
establishment of such subsidiaries will not be subject to excessively onerous qualification 
requirements and waiting periods not listed in its WTO schedule.
1 
In this context, could China please clarify whether  
(a) it permits foreign-funded banks to use the same structure of "second-tier" 
branches and sub-branches that is used by state-owned commercial banks;  and 
(b) it will permit foreign-funded banks to ta ke the 30% capital deposits from other 
banks on an equal basis with local banks;  and 
(c) it has any justification for the additional five-year waiting period for the conduct 
of local currency business? 
                                                      
1 It appears that China requires foreign banks to have operated a representative office for two years, 
then conversion to a subsidiary plus three years of foreign currency business, two of them consecutive with 
positive results. S/FIN/W/59 
Page 2  
 
  4. The foreign ownership caps for existing Chinese banks (20% individually and 25% 
collectively) appear to be still in place. 
Considering that China has not schedul ed limitations on foreign ownership, 
when is China planning to fully implement its WTO commitments and permit full foreign ownership of Chinese banks? 
5. Minimum working capital requirements for direct  branches of foreign banks also remain 
extremely high, amounting to RMB 300 million per branch depending on the business scope.  These 
requirements are much higher than minimum cap ital requirements in most other countries and 
effectively limit market access for foreign banks.  Fu rthermore, banks that incorporate locally are only 
allowed to retain one branch, under very strict conditions. 
Considering the still extremely high leve l of capital requirements, could China 
please indicate (1) whether it intends  to further reduce minimum capital 
requirements for branches, and (2) why it has introduced such a one-branch cap 
and when it intends to lift it?
2 
6. The geographical expansion of foreign insurers  is still hampered significantly by slow and 
unpredictable regional-level licensing processes,  in many cases amounting to discriminatory 
economic needs tests.  
When will China take any steps to ensu re equal treatment between domestic and 
foreign insurers with regard to branch/sub-branch licensing and geographic expansion? 
7. China has made full national treatment commitments in the banking subsector (k) Provision 
and transfer of financial information, and financia l data processing and related software by suppliers 
of other financial services .  China’s regulatory regime in this subsector is, however, applied only to 
foreign suppliers, and the current regulator appears to be engaged in compe tition with other suppliers. 
(a) Can China confirm that the regulator in this sector is also carrying out activities 
in direct competition with fo reign commercial operators? 
(b) Can China confirm that domestic firms ar e not subject to the same supervision 
and domestic regulation as foreign firms in this sector? 
8. On 10 September 2006, Xinhua News Agency issued the Administrative Measures on News 
and Information Release by Forei gn News Agencies within China .  These measures stipulate that all 
foreign vendors of financial information must opera te through a distributor appointed by Xinhua.  
(a) Can China clarify the conditions under which foreign entities can be designated 
as an agent for the distribution of news and information in China?  
(b) Can China clarify if a fulfilment of the conditions laid out in Article 7 of the 
2006 Measures will automatically lead to a designation as distributor? 
(c) Will firms in China continue to be able to contract with the same suppliers of 
financial information for the same serv ices as they do outside China under the 
Administrative Measures? 
                                                     
 
2 China's WTO schedule does not appear to contain a cap on branch licenses.  S/FIN/W/59 
 Page 3 
 
 
  (d) Will firms be able to receive the same fi nancial information and at the same time 
as investment firms outside China? 
(e) Can China clarify how many suppliers of financial information services have 
been licensed under the 2006 Administrative Measures? 
9. Under the 2006 Administrative Measures from Xinhua News Agency, foreign financial 
information suppliers are required to supply Xinhua  with commercially confidential information about 
clients, products and product prici ng.  Xinhua is, however, both a market competitor and regulator of 
financial information, through Xinhua China Ec onmic Information Services (CEIS) and Xinhua 
Foreign Information Administration Centre (FIAC) .  China committed in the WTO to establish an 
independent regulator in the financial information sector, inter alia .  
(a) How do the Administrative Measures effectively separate the regulatory 
authority of Xinhua from its commercial operations?  
(b) How will the confidentiality of commercial information and protection of trade 
secrets and intellectual property be ensured under the 2006 Administrative Measures? 
10. China's specific commitments under the GATS with  respect to "Provision and transfer of 
financial information" list no limitations on comm ercial presence in China and stipulate that 
"Branches of foreign institutions are permitted".  
(a) Could you explain how many branches of foreign institutions have been 
established in this sector in China?  
(b) Could you clarify the conditions that apply to obtaining a license for establishing 
a branch or any other form of legal establishment?  
11. In June 2007, Xinhua has launched its servi ce "Xinhua '08" through which it supplies 
financial information services in China. 
(a) Can China confirm that Xinhua '08 is a serv ice that operates in competition with 
the services of other providers of financial information services?   
(b) Can China explain how Xinhua '08 relates to the regulatory role that has been 
assigned to Xinhua News Agency? 
 
__________