China’s Financial Regulations: Are Other WTO Members’ Concerns Realistic or Overcritical?

Abstract

Since China’s WTO accession it has been involved in four WTO disputes relating to financial services as the respondent, while other WTO Members remain concerned that China continues to limit access to foreign financial services and service suppliers. As other WTO Members’ concerns could be either realistic or overcritical, this paper aims to explore whether there are any further inconsistencies in China’s GATS obligations and financial regualtions. After reviewing all WTO Members’ concerns on China’s financial services, this paper examines the consistency of four frequently and constantly raised issues with the GATS agreement and China’s WTO obligations. As a result, this paper finds that two regulations are inconsistent with Article XVI and Article XVII of the GATS: the 20 per cent cap on shareholding in a Chinese-funded bank by a single foreign financial institution, and the 1 million RMB minimum for foreign banks’ local currency business. Further, China still has not complied with its transparency obligations under the Accession Protocol and Working Party Report. These findings are significant for the Chinese government as well as other WTO Members who already have or want to have close trade relations with China in financial services.