China’s Vice Minister of Finance Zhu Guangyao

China will raise foreign ownership limits in domestic financial firms and grant foreign investors greater access to the financial services market, Zhu Guangyao, Vice Minister of Finance. The country will raise the limit on foreign ownership in joint-venture firms in the futures, securities and funds sectors to 51% from the current 49%. At the same time China has also urged the United States to loosen restrictions on exports of high-tech products to China, comply with Article 15 of the Protocol on China’s Accession to the World Trade Organization (WTO), treat Chinese investors in the U.S. fairly, facilitate China International Capital Corp’s application for an independent financial business license, and be discreet in using trade remedy measures against Chinese exports to the U.S.

A change of 1% in stake holding can fundamentally modify the corporate governance of joint venture life insurers in China and attract more foreign investors, but it is unlikely to make them major players in the country’s vast insurance industry, according to industry watchers. After three years, foreign players will be able to hold a 51% stake in such joint ventures, currently capped at 50%, Zhu said in Beijing. After five years, the cap will be scrapped. AIA, Allianz and Manulife are the only companies currently exempt from the 50% limit – AIA has a 100% owned subsidiary and the other two have a 51% stake in their joint ventures.

Last year, JP Morgan withdrew from its joint venture with First Capital Securities. Jamie Dimon, JP Morgan’s Chief Executive and Chairman said he would like to have operational control of future investment banking activities in China. “JP Morgan welcomes any decision made by the Chinese government that looks to liberalize its financial sector further,” a Spokeswoman said in a statement.

In June, HSBC became the first bank to own 51% of its mainland joint venture, under the Closer Economic Partnership Agreement (CEPA), a free-trade agreement between Hong Kong and the mainland designed to promote financial services. UBS reiterated its desire to own 51% of its joint venture, but analysts cautioned that majority control by itself was not a magic bullet.

“For joint venture life insurers, there is a prevailing headache that derives from the 50:50 stake holding structure, as no party has the decisive say, leading to unnecessary infighting, waste of resources, and which hinders the implementation of strategy and operation of a joint venture life insurer,” said Wesley Cui, General Manager, China Insurance Consulting at Willis Towers Watson.

Insurance premiums in China grew by 28% last year, their fastest pace since 2008, with the country contributing to about half of all premium growth globally. At present, there are 28 life insurance joint ventures in China, accounting for 7% of the market share as far as premium is concerned.