2018 in reforms: Opening-up the financial sector

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As a milestone year marking the 40th anniversary of China's reform and opening-up, 2018 saw further groundbreaking policies to open-up various sectors of the economy.

From reforms in the auto sector to the removal of caps on China's lucrative financial services domain, 2018 has been a key year for the country as the Chinese economy continues to develop.

As Chinese President Xi Jinping said during the China International Import Expo in November, China's push for reform and opening-up does not just benefit China, but benefits the whole world.

Read on for a recap of China's landmark financial reforms through 2018.

CGTN Infographic

Freeing up the financial sector in 2018

The context:

--In the past 40 years, China has gradually opened-up its financial services and capital markets sector, welcoming foreign firms to establish joint ventures (JVs) with domestic firms to access a market with huge potential.

-- The domestic Fintech sector has grown and developed at an incredible pace, enabling wider access to financial services with the use of mobile technology, artificial intelligence and other advances in tech.

-- The Chinese economy has become closely integrated with international markets in recent years, with the renminbi increasingly internationalized and foreign investors given access to China's A-share markets through Stock Connect programs.

VCG Photo

The calls for reform:

-- Foreign futures, securities and fund management firms were limited to minority stakes in JVs with Chinese partners. Companies like BNP Paribas and Morgan Stanley established and then later withdrew from JVs in China, apparently frustrated over a lack of control over operations.

-- Despite rapid development in Fintech, Chinese consumers still lack access to basic and more sophisticated financial services. 224 million Chinese people still don't have bank accounts, according to World Bank data.

-- The rapid growth of the domestic financial services sector has led to concerns over a lack of regulation and consumer protection. According to China Daily, despite curbs on illegal schemes like peer-to-peer lending, the "potential risk is still considerable."

UBS became the first foreign firm to receive an approval to take a majority stake in a financial joint venture in November. /VCG Photo

2018's reforms and solutions:

-- Following plans announced in November 2017 to remove equity caps, this year has seen firms like Goldman Sachs, Morgan Stanley and Nomura express an interest in taking majority stakes in their JVs, with UBS the first foreign firm to be approved for a majority stake in a financial services JV in November.

-- Equity cap limits on foreign firms will increase to 51 percent in securities, insurance, futures and fund management, with all limits to be removed within three years.

-- China's two bodies which regulated banking and insurance have been merged into the China Banking and Insurance Regulatory Commission. The move should see greater coordination on regulation with the China Securities Regulatory Commission and the People's Bank of China, as China looks to further align its policies with international standards.

-- Foreign investors now have more ways to access the Chinese market than ever before. Chinese A-shares were included in the MSCI Emerging Markets Index in June, while caps on the amount of capital a foreign institutional investor could move out of China were completely lifted that same month.

-- Trading quotas on the Shanghai-Hong Kong Stock Connect (northbound) were quadrupled in May to 52 billion yuan (7.55 billion U.S. dollars), further widening one of the most important channels for foreign investors into the mainland A-share market.