BMCP R&D Team
• Financial & Professional Services: Banking
• Financial & Professional Services: Insurance
• Financial & Professional Services: Capital Markets/Asset Management
• Financial & Professional Services: Belt and Road Initiative (BRI) Consulting
An Overview of China’s Financial & Professional Services Sector Opportunities
China has been the world’s largest banking system by assets since 2016 with a total of RMB 252.4 trillion in bank assets as of the end of 2017. However, foreign banks are still deemed niche players in China; accounting for less than 2% of China’s banking assets.
The state led merger on 18th March 2018 of the China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission (CIRC) has created a new body: The China Banking and Insurance Regulatory Commission (CBIRC). The formation of CBIRC was created with the intention of addressing China’s financial regulatory vacuum and to provide enhanced supervision of the financial market. The CBIRC will cede some authority to China’s central bank, the People’s Bank of China (PBOC), which will assume responsibility for drafting key regulations and prudential oversight in banking and insurance.
China is home to the world’s second largest insurance market, which is growing at a rate of 20% year-on-year. It is predicted that a rise in the insurance market share held by foreign companies will take place by 2020 as the onshore insurance industry becomes more competitive. The insurance industry in China offers huge potential for growth, yet issues such as barriers to access for foreign investors and licensing restrictions inhibit opportunities for growth amongst foreign insurers and brokers. Despite these limitations, the outlook is positive: as a result of President Xi’s reforms that seek to create a “New Normal” growth agenda based on consumption-led demand and outbound investment, China’s insurance market will need to respond to match the requests of maturing businesses and more discerning middle-class urbanised consumers.
Capital Markets/Asset Management
Despite a recent economic slowdown and high volatility, China displays robust long-term fundamentals to support a growing asset management market. By the end of March 2017, the size of the asset management market in China reached approximately GBP 6 trillion (RMB 53.47 trillion).
The asset management industry is heavily regulated by China’s financial regulatory system, under which the People's Bank of China (PBOC) is responsible for monetary policies and regulations of the macro-financial market, and the Chinese Securities Regulatory Commission (CSRC) and the CBIRC take charge of different financial institutions and their respective businesses.
Foreign financial institutions constitute a relatively small sector in China. A primary activity undertaken by foreign financial institutions is to provide onshore products and mandates of Chinese assets in RMB for local investors. A secondary activity is to provide access to global funds and products for investors with funds already offshore and in non-RMB currency.
China’s Belt and Road Initiative (BRI)
China’s Belt and Road Initiative (BRI) will generate significant business opportunities for foreign companies which obtain the desired expertise in the FPS sector, such as banking and insurance. The UK’s value proposition for the BRI is in the provision of specialist insurance products where Chinese or other local market insurers may not have expertise or capacity. Banks will also play a key role in financing infrastructures, as well as facilitating and advising cross-border investment.
Alongside the BRI, the Beijing-Tianjin-Hebei Strategy is another important national strategy for future reform and opening-up. The pilot and trial zone, “Xiong’an New Area”, is considered the end-result of the evolving results in the carrying forward of the Beijing-Tianjin-Hebei Strategy. UK Prime Minister, Theresa May, also expressed willingness to establish a Financial and Technology Zone in this area while visiting China, implying increased future opportunities for UK firms in the Financial and Professional Services sector.