To further expand the Opening-up of financial industry, the State Council issued the Amendment of the Regulations of the People's Republic of China on Administration of Foreign Funded Insurance Companies and Foreign Funded Banks (State Council Order No. 720) on 30 September 2019. It has become effective since.
KPMG summarized the major changes mentioned in New Foreign Insurance Companies Regulation and New Foreign Banks Regulation in this alert, as well as explored the potential tax issues faced by foreign investors when entering the Chinese banking and insurance markets.
Highlights of changes on New Foreign Insurance Companies Regulation:
Highlights of changes on New Foreign Banks Regulation:
The Amendment focused on market access, business scope (including operation requirements) and regulatory procedures of foreign banks and insurance companies. It removed restrictions upon shareholder’s total asset, type, overseas operation experience, etc., expanded business scope of foreign banks, and greatly accelerated the opening-up of banking and insurance industry, all of which aimed to attract more foreign financial institutions to invest in China.
However, the regulatory and tax environment remains complicated during the opening-up. From regulatory perspective, RMB license approval has been removed but foreign banks should still comply with the prudential requirements stipulated by the banking regulatory department of the State Council. Meanwhile, interest-bearing asset percentage of foreign bank branches is still subject to further confirmation from the regulator. In this regard, the market entry level for foreign financial institutions is lower whilst foreign financial institutions may face a stricter regulatory environment during the business operation in China.
From tax perspective, areas of complications and uncertainties still exist, we list a few tax considerations here:
With an overall deepening of reform and opening-up, and in light of the ever-changing domestic and international economy, China is exerting even more effort to facilitate its opening-up. Meanwhile, KPMG will continue to pay close attention to relevant policies and assist foreign financial institutions in investing and expanding business in China. We are well-positioned with our global network to aid foreign-invested enterprises. We can provide the following services: