. /.  RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/64 
10 November 2008 
 (08-5442) 
Committee on Trade in Financial Services Original: English 
 
 
 
COMMUNICATION FROM JAPAN 
 
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 6 November 2008, from the delegation of Japan, is being circulated to the Members of the Committee on Trade in Financial Services. 
 
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Questions and Comments of Japan on the Implementation by China
 
of its Commitments on Trade in Financial Services  
  
1. Japan recognizes and welcomes China's c ontinuous efforts to implement its WTO 
commitments for financial services.  Japan believes th at liberalization in 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, including on the establis hment of a commercial presence, thus maximizing 
the benefits of liberalization.  Japan is of the view  that there is still room for further improvement in 
this area, in view of China's commitment to tran sparency as described in the Report of the Working 
Party on the Accession of China. 
2. In accordance with paragraph 18 of the Protocol  on the 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. 
REGULATION ON REINSURANCE  
3. While Japan welcomes the movement by the Gove rnment of China with a view to revising 
insurance regulations of the Insurance Act, Article  11 of the Administration of Reinsurance Business 
Regulations requires direct insurance companies to solicit, from at least two reinsurance companies in 
China, reinsurance offers amounting to more than 50  percent of the reinsurance to be ceded.  While 
China stated in the previous TRMs that this provi sion did not "force" direct insurance companies to 
solicit reinsurance offers from companies in Ch ina and did not have a negative impact on the 
conditions of competition, in practice, this is cons idered as compulsory and the activities of insurance 
companies are in fact affected.  In light of Article 28 of GATS which stipulates that "supply of S/FIN/W/64 
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  service" includes the marketing of a service, please explain how this limitation can be justified, given 
that no limitations regarding cross-border tr ade in reinsurance have been scheduled. 
4. Article 22 of the Administration of Reinsura nce Business Regulations prohibits foreign 
insurers from engaging in the rein surance business with their affilia tes, which poses a serious problem 
on risk management of insurance companies.  Please  explain how this limitation can be justified when 
no limitation has been scheduled regardi ng cross-border trade in reinsurance. 
B. 
MINIMUM CAPITAL REQUIREMENTS  
5. When asked about the minimum capital requireme nt for foreign insurers in the previous 
TRMs, China responded that this was for prudential reasons and there was no international standard 
on this issue.  However, this requirement is indeed  high in light of international standards.  Please 
indicate whether China plans to relax minimum cap ital requirements for foreign insurance companies 
and explain what condition and situation have made China set such high minimum capital 
requirements. 
C. MEASURE  
6. China made the "Administrative Methods on Eq uity Interest in Insurance Companies" 
available for public comment on 11 March.  Paragra ph 5 of Article 13 of the Methods says that "a 
foreign financial institution that has been permitted to invest in China's in surance market shall not 
invest and hold equity in an insurance company of the same kind."  Please explain the current status 
of this regulation and also how this new restriction can be justified in light of the national treatment 
obligation and horizontal commitments in China's schedule ("The conditions... will not be made more 
restrictive than they exist as of the date of China's accession to the WTO."). 
II. BANKING 
A. 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, which do not have reservations specially  on banking branches.  In the last TRM, China 
explained that it has this requirement because the branches of foreign banks are not covered by the 
deposit insurance system.  Does Chin a not intend to leave consumers to decide whether to deposit 
RMB in a branch of foreign banks or not, under th e situation that such risk is well notified and 
informed? 
III. FINANCIAL INFORMATION SERVICES 
8. Japan maintains its interest in China's im plementation of commitments concerning the 
"measures affecting financial information servi ces and foreign financial information supplies". 
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