According to ‘people familiar with the matter’, the Chinese central bank is looking at opening up the financial sector to foreign investors, notes the analysis team at Rabobank.
Key Quotes
“Whilst details are still unknown, Bloomberg’s sources suggest that the PBoC proposal may include permission for foreign financial institutions to control their Chinese joint ventures and may raise the ownership cap on Chinese banks from 25%. This could be a major reform, and may smooth the relationship with the US, with President Trump still looking at “fair play” in overseas investments. While Chinese institutions have access to the US market, US institutions have always been restricted in their operations in China. This has been a thorn in Trump’s side.”
“Of course, the question remains how much of these rumoured reforms will actually be implemented, and in what shape or form. Moreover, if such reforms are indeed being discussed, one can only ponder whether this also leads to other reforms on capital restrictions and China’s FX regime. After all, why would money flow in if it can’t get out of the country? Though we remain sceptics, such reforms could have a meaningful impact on the position of CNY in global markets, more so than Venezuela’s recent decision to shun the US dollar and price its oil in terms of the Chinese renminbi.”
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