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China Opens the Door to Foreign Investment in the Securities Industry
July 2, 2002
The China Securities Regulatory Commission is meeting China's WTO accession requirements with respect to foreign investment in the securities industry by issuing two sets of regulations that take effect on July 1, 2002: the Regulations on the Establishment of Securities Companies with Foreign Equity Participation and the Regulations on the Establishment of Fund Management Companies with Foreign Equity Participation. As required in China's Schedule of Specific Commitments on Services, qualifying foreign investors are permitted to take aggregate interests of up to one-third or 33% in securities companies and fund management companies, increasing in the case of fund management companies to 49% by the third (3rd) anniversary of China's WTO membership.
Both sets of Regulations contemplate that foreign investors may participate through joint ventures or by shareholdings in limited liability companies, the latter of which are more flexible organizational forms with respect to capital formation, liquidity and other dimensions. Foreign investors may participate through the establishment of new companies or the conversion of existing domestic companies to companies with foreign equity participation. Foreign investors must be financial institutions from jurisdictions with sound and comprehensive securities regulatory systems, and must also satisfy specific experience and/or capital and other conditions. The China Securities Regulatory Commission retains discretion to impose qualifications beyond those set forth in the two sets of Regulations.
Translations of both sets of Regulations are attached.