Although trade tensions between the U.S. and China show no signs of abating, there are some reasons for cautious optimism. One is that the Americans have finally gotten around to giving the Chinese a concrete list of demands -- and, on at least one score, China is prepared to deal.To get more chinese financial news, you can visit shine news official website.
The Chinese financial market has long been closed to foreign ownership, despite widespread criticism from the U.S. and others. In November, following Donald Trump's state visit to Beijing, China's finance ministry announced that this was set to change in 2018, and now the Trump team is pushing China to make good on that promise.
The catch, of course, is that the practical impact of this opening will be minimal -- and for China, that's the point. It will accelerate its financial opening not because the Americans are demanding it, but because foreign financial firms no longer pose much of a threat. Chinese banks are now too big and too dominant domestically for foreign financial institutions to genuinely compete with them.Consider that the four largest banks in the world are all Chinese state-owned institutions. Together they have $11.9 trillion in assets. The world's next five biggest banks roughly match up to China's Big Four, accounting for $11.8 trillion, but they represent the largest institutions in four separate countries -- Japan, the U.S., the U.K. and France. No single country has financial firepower on China's scale. Just taking America's banking sector -- where the concept of "too big to fail" originated -- it would require the combined balance sheets of the top 10 lenders to equal the assets of just China's top four.
Within China, foreign firms own slightly more than 1 percent of total bank assets, compared to a full 36 percent owned by the five major state-owned institutions. Similarly, foreign banks account for less than 1 percent of annual earnings, or the equivalent of about 5 percent of the yearly profit made by just the Industrial & Commercial Bank of China. Starting from such a minuscule base, and up against such huge incumbents, foreign banks will always be relegated to the minor leagues in China, whether market restrictions are eased or not. And it's not just size that gives Chinese banks an advantage. They also benefit from a well-oiled industrial policy. "Buy China" stipulations apply to projects of any significant magnitude, foreign or domestic, and include purchases of financial services. Such requirements generally aren't written into formal policy documents, because they don't have to be -- everyone involved understands them. Cross-shareholding arrangements between state-owned financial institutions and the companies whose projects they finance help reinforce these requirements. Increasingly, China is even exporting this model through its Belt and Road initiative.
A final disadvantage for foreign firms concerns data management. Chinese regulators are finalizing the details of a new cybersecurity law that will cover cross-border data flows, protections for personal information, and other sensitive issues. It's aimed at protecting China's "critical information infrastructure," of which finance has been deemed a part, and will make handling certain kinds of data far more onerous. Foreign financial institutions will almost certainly face more restrictive rules than domestic ones.
The same approach applies to payment systems. China allowed Apple Pay into its market 2016, but only after WeChat and Alipay had achieved complete dominance in the mobile-payments space and Apple Inc. had agreed to partner with the state-owed payments system Union Pay.