The CSRC website also shows that, since UBS AG was approved to become the first QFII in May 2003, there have been 52 QFIIs, 49 of which have received a combined quota of $9.995 billion.

The insurance sector took the lead in opening the financial sector when its transitional period ended early in 2004, said Meng Zhaoyi, Director of the International Department of the China Insurance Regulatory Commission (CIRC). In this sector, foreign property insurance companies cannot deal with motor vehicle third-party liability insurance and foreign stock holdings should not be above 50 percent in life insurance companies. Apart from that, the insurance sector has been opened to the outside world on the whole.

A CIRC official recently told Xinhua that, as of end-March 2007, 49 foreign insurance companies had set up 132 headquarters and branches in China, holding 3.88 percent of China’s insurance market shares, up 2.3 percentage points compared to the pre-WTO period in China. In foreign capital-favored areas like Beijing, Shanghai and Guangdong, foreign insurers’ market shares reached 13.17 percent, 18.69 percent and 10.13 percent, respectively. Premium that foreign insurance companies garnered from the Chinese market also increased from 3.329 billion yuan at the end of 2001 to 25.91 billion yuan by the end of 2006.

The official added that the CIRC will continue to open the market and encourage foreign insurers to take an active role in pension, healthcare, agriculture and liability insurance. Foreign insurance companies are also encouraged to set up branches in central and west China.

Capital market gradually opened

“Reviewing the opening-up history of China’s capital market, we had explored channels for foreign capital to invest in our listed companies in the initial period after setting up our capital market,” said Liu. “We set up a B-share market catering for foreign investors, breaking the path of capital market’s opening up.”

The first B-share stock was issued in 1992, and the first H-share stock appeared on the Hong Kong stock exchange in 1993.

“Then, Chinese-foreign joint ventures were allowed to issue stocks and get listed on the domestic stock market,” Liu continued.

From 2001 to 2006, China honored its WTO commitments related to the capital market. While renminbi is still unconvertible under capital accounts, the QFII system was implemented in 2002, and is considered a milestone during the opening-up process of the domestic capital market.

Last year qualifications for QFIIs and terms of capital flow were loosened, account opening and investment of QFIIs were facilitated, and an investment supervision system (especially information disclosure), was completed, according to Liu.

In February 2006, China also promulgated policies granting foreign investors’ strategic investment in listed companies having completed split share structure reform. “This indicates a new phase of the opening up of China’s capital market,” said Liu.

The Chinese Government attaches great importance to opening the capital market, but the market should open gradually according to the real status of China’s economic development. We can’t be anxious to get quick results, said CSRC Chairman Shang.

“China is developing its economy, which had experienced years of decline and weakness,” said Shen Dingli, Executive Vice Dean of the Institute of International Studies at Fudan University. “If the economy hasn’t developed for one to two decades or has no power of controlling wealth, it’s unreasonable to require China to fully open its capital market. China will certainly take into account potential risks, which can be brought by market opening.”

“The capital market is part of a country’s economic system,” said Bu Guoxun, President of Nanjing Securities Co. “If China’s capital market is soon fully opened up, it means this part will undergo sudden changes, which will definitely affect the development of other related areas. Opening up of a country’s capital market should keep pace with the country’s industrial development and opening up, and the process of its financial liberalization.”

“An important element to decide the effect of fully opening the capital market is the market scale before opening,” Bu pointed out. “In developing countries, while their capital market scale is still small, opening the market hastily will certainly cause negative effects on the country’s economic development.”

Statistics show that China’s total market value of stocks had been 8.9 trillion yuan by the end of 2006, 42.69 percent of its GDP in 2006. That’s only a tiny figure compared with developed countries. The index for the United States and the UK had been 139 percent for both by the end of 2004.

Bu also said that opening the capital market fully would greatly impact local securities companies lacking international competitiveness.