Taiwan Challenges China's Restrictions on Foreign Banks Under WTO Rules

Strategic Insights -

Taiwan has raised concerns with China over the restrictions it has imposed on foreign banks operating in the country, arguing that they violate China's commitment to the World Trade Organization (WTO). The Taiwanese government has questioned whether China's policies align with the rules of the General Agreement on Trade in Services (GATS) and its accession commitments to the WTO. Specifically, Taiwan has objected to China's requirement that a foreign bank branch must have a minimum capital of 100 million renminbi to 500 million renminbi and that a foreign bank must have assets of at least US$20 billion to set up a branch in China. Taiwan has also demanded that China explain its rules relating to the minimum assets requirement and shorten the time for licence-approval for foreign insurance companies.

Key Takeaways:

  • Taiwan has questioned China's restrictions on foreign banks operating in China, arguing that they violate China's accession commitment to the WTO.
  • The Taiwanese government has raised concerns over China's requirement for foreign bank branches to have a minimum capital of 100 million renminbi to 500 million renminbi.
  • Taiwan has also challenged China's rule that foreign insurance companies must set up offices in China for at least two years before obtaining a license to open branches.
  • China's licence-approval procedure has been criticized for becoming a market-access restriction, which is not in line with its accession agreement.
  • Several Taiwan banks have established offices rather than branches in China, as they have not yet been authorized to set up branches.
  • Taiwan recognizes China's efforts to improve its business environment but disagrees with the current restrictions imposed on foreign banks.

Statistics:

  • China joined the WTO in 2002.
  • Taiwan has raised concerns over China's restrictions on foreign banks operating in China since the WTO's Transitional Review Mechanism began reviewing China's trade policy this month.
  • The minimum capital requirement for foreign bank branches in China is between 100 million renminbi to 500 million renminbi.
  • The minimum assets requirement for foreign banks to set up a branch in China is US$20 billion.

Sources:

  • A source close to the Taiwan Permanent Mission to the WTO
  • CNA (asia pulse)