. /.  RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/58 
18 October 2007 
 
 (07-4517) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM JAPAN 
 
Transitional Review Mechanism pursuant to Paragraph 18 of
 
the Protocol of Accession of the People’s Republic of China  
 
 
 The following communication, dated 15 Octobe r 2007, from the delegation of Japan, is being 
circulated to the Members of the Comm ittee on Trade in Financial Services.  
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Questions and Comments from Japan on the Implementation by China
 
of its Commitments on Trade in Financial Services-  
 1. Japan recognizes and welcomes China’s continuous efforts to implement its WTO 
commitments for financial services.  Japan believes that liberalization of the financial services sector 
will not only enhance the efficiency of the sector, but also contribute to China’s overall economic 
growth.  In this context, Japan continues to en courage China to make further efforts to ensure 
regulatory transparency, thus maximizing the benefits of  liberalization.  Japan is of the view that there 
is still room for further improvements in this area, in view of China’s commitment to transparency as 
described in the Report of the Workin g Party on the Accession of China. 
2. In accordance with paragraph 18 of the Protoc ol of 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 cooperation 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 and relevant inform ation to the following questions and comments. 
I. INSURANCE 
A. L
IMITATION ON REINSURANCE  
3. Article 11 of the Administration of Reinsu rance Business Regulations requires direct 
insurance companies to solicit, from at least two re insurance companies in Ch ina, reinsurance offers 
amounting to more than 50 percent of the reinsuran ce to be ceded.  While Ch ina stated in the last 
TRM that this provision did not “force” direct in surance companies to of fer the reinsurance to 
reinsurance companies in China, in practice this is considered as compulsory.  In light of Article 28 of 
GATS which stipulates that “supply of service” includ es the marketing of a service, please explain 
how this limitation can be justified, given th at no limitations regarding cross-border trade in 
reinsurance are scheduled. 
4. Article 22 of the Administration of Reinsura nce Business Regulations prohibits foreign 
insurers from engaging in the reinsurance business with their affiliates.  Please explain how this 
limitation can be justified when no limitation is sche duled regarding cross-border trade in reinsurance. S/FIN/W/58 
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  B. M
INIMUM CAPITAL REQUIREMENTS  
5. When asked about the minimum capital requireme nts for foreign insurers in the last TRM, 
China responded that this was for prudential reasons.  However, this requirement is high in light of 
international standards.  Please indicate whether China plans to relax minimum capital requirements 
for foreign insurance companies. 
II. BANKING 
A. FOREIGN EQUITY CAP 
6. Please explain why China limits foreign equity participation to a maximum of 20 percent for a 
single foreign investor at existing Chinese domestic banks.  This limitation is a limitation on market 
access and appears to be in conflict with China’ s schedule of commitments where no limitation on 
foreign equity participation is scheduled. 
B. LOCAL CURRENCY RETAIL BUSINESS  
7. China requires foreign banks to be locally incorp orated if they are to engage in the local 
currency retail business.  Please explain how this can be justified in light of China’s accession 
commitments, and please inform us as to whether or  not China is considering introducing flexibility to 
the requirements for newly established branches to engage in the local currency business. 
C. LONG-TERM BORROWING  
8. Please inform us as to whether or not China pl ans to introduce flexib ility in applying long-
term borrowing quotas to foreign invested banks, in light of the provision of equal competitive 
opportunities (as defined in Article XVII of the GATS). 
III. PROVISION AND TRANSFER OF FINANCIAL INFORMATION AND FINANCIAL 
DATA PROCESSING AND RELATED SOFTWARE BY SUPPLIERS OF OTHER 
FINANCIAL SERVICES 
9. The “Measures for Administering the Release of News and Information in China by Foreign 
News Agencies” prohibit consumers in China from directly subscribing news and information 
services provided by foreign news agencies.  Please  explain how this can be justified in light of 
China’s commitments to the “provi sion and transfer of financial information and financial data 
processing and related software by supplier of other financial services” in the financial service sub-
sector, even if the objective of this measure is to restrict mass media. 
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