China boosts financial openness, accelerates two-way market integration

China's financial regulators have rolled out a series of measures this year to further open up the country's financial markets, marking another significant step toward creating a more integrated, two-way financial system.

A key component of the push is the steady internationalization of Chinese renminbi or RMB. To support the move, China's financial regulators have optimized mechanisms such as the Bond Connect and the Cross-Border Interbank Payment System, making it easier for foreign investors to access the Chinese markets and strengthening the RMB's role in global trade and finance.

Between January and August, the RMB payments accounted for 26.5 percent of the total value of cross-border trade transactions, reflecting the growing global use of the currency, according to official data.

SWIFT data showed that RMB is the fourth largest payment currency globally, the second largest trade finance currency, and the third in terms of weight in the International Monetary Fund's Special Drawing Rights currency basket.

Meanwhile, China is now the world's second-largest bond market, according to Lu Lei, vice governor of the People's Bank of China, the country's central bank, with foreign investors holding nearly 4.6 trillion yuan ($628 billion) in Chinese bonds, setting a new record.

At the same time, foreign financial institutions are accelerating their expansion into China's market. In May, Belgium's Ageas Group invested 1.075 billion yuan to acquire a 10 percent stake in Taiping Pension Insurance (TPP), a subsidiary of China Taiping Insurance Holdings.

"The investment in TPP will allow Ageas to tap into the significant growth potential of the Chinese pension market," said the company.

This is part of a broader trend, with major international insurers like France's AXA, the US's Prudential, and Italy's Generali having made significant strategic investments in the country through equity acquisitions and joint ventures.

By the end of June 2024, 67 foreign insurance firms had established operations in China, and 68 foreign insurance representative offices had been set up. The total assets held by foreign insurance companies in the country now stand at 2.67 trillion yuan, according to China's National Financial Regulatory Administration.

Xu Xian, vice president of the Shanghai Insurance Association, told China Central Television that China's insurance market presents vast opportunities for foreign investors. "Foreign capital will play a crucial role in the country's high-quality financial development, particularly in areas like technology finance, green finance, inclusive finance, pension finance, and digital finance," Xu said.

The growing international interest has been further bolstered by the removal of foreign ownership limits in key sectors, including banking, securities, insurance, asset management, and futures, which offers even more opportunities for global financial institutions to deepen their presence in China.