RESTRICTEDWORLD TRADE
ORGANIZATIONS/FIN/W/19
1 October 2002
(02-5301)
Committee on Trade in Financial Services Original:  English
COMMUNICATION FROM THE UNITED STATES
Transitional Review Mechanism Pursuant to Section 18 of the
Protocol on the Accession of the People’s Republic of China
Questions from the United States to China concerning Financial Services
The attached paper has been received from the delegation of the United States with the
request that it be circulated to Members of the Committee on Trade in Financial Services.
_______________
I. INSURANCE
On December 5, 2001, the State Council adopted the Administrative Regulations for the
Administration of Foreign-In vested Insurance Companies , which went into effect on February
1, 2002.
1. The Regulations are difficult to decipher because they must be read in conjunction with other
laws, regulations and measures that are not clearly identified.  It is unclear what measure takes
precedence, and whether such measures conform to China’s WTO commitments in this sector.  China
Insurance Regulatory Commission (CIRC) offici als have stated that China would issue new
implementing rules that would lay out in mo re detail how firms should comply with the Regulations .
(a) Please describe the anticipated time frame for the issuance of the new implementing
rules.
(b) Please confirm that CIRC will provide an opportunity for all interested WTO
Members and foreign firms to comment on th e new implementing rules prior to their
implementation, in accordance with the commitment made by China in its Protocol ofAccession at Part I, Section 2(C)2).
2. In paragraph 308 of China’s Working Party Report, China committed to prevent licensing
procedures and conditions from acting as barriers to market access and that such procedures and
conditions would not be more trade restrictive than necessary, that applicants would not need to be
invited to apply for a license, and that the application process would be transparent with opportunitiesto cure deficiencies and reapply if necessary.  Articles 8-12 of the Regulations , however, continue to
maintain a multi-tiered application process that inv ites uncertainty and delay, and in practice there
appears to be a continued need for an invitation to  apply from CIRC.  Please explain what steps China
will take to bring these provisions in to compliance with China’s commitments?
3. In its Services Schedule, China committed to allow non-life firms to establish as a branch and
allow internal branching in accordance with the lifting of China’ s geographic restrictions.  InS/FIN/W/19
Page 2
addition, in paragraph 313 of the Working Party Report, China agreed that it would not apply the
qualifications for foreign insurers applying for a li cense to enter China’s market to foreign insurers
already established in China merely seeking authorization to establish branches or sub-branches.
Notwithstanding these clear commitments, CIRC stated in a February 2002 meeting with U.S.
Government officials that non-life firms already established in China, wishing to open branches,
cannot do so unless they first establish as a subsidiary.  Please confirm that China will permit internal
branching by foreign non-life firms, consistent with the phase-out of China’s geographic restrictions
and in accordance with China’s WTO commitments.
4. Article 7 of the Regulations  states that the minimum registered capital for a joint venture or a
wholly foreign-owned insurance company is RM B 200 million.  However, in the February 2002
meeting between CIRC and U.S. Government official s, the CIRC stated that, in addition to the RMB
200 million for the initial operation, foreign-invested insurers must have an additional RMB 100million in registered capital for each subsequent branch, not to exceed RMB 500 million (pursuant to
Article 7 of CIRC’s Insurance Company Administrative Measures ).  If the insurers wish to expand
beyond the initial four operations, then the companies are required to have an additional RMB 50
million in registered capital per branch up to a total of RMB 1.5 billion, for a “national license”
(pursuant to Article 13 of the Insurance Company Administrative Measures ).
(a) Please confirm that the above description includes all capital requirements required to
establish branches in China.
(b) China’s solvency requirements are unusually high, even by international norms.
While the GATS permits WTO Members to take necessary regulatory action
(including measures for prudential reasons),  these measures should also bereasonable.  Under the GATS Annex on Financial Services, prudential measures shall
not be used as a means of avoiding a Member’s GATS commitments.  Please explain
the justification for such high capitalization requirements, given the size and scope of
China’s insurance market.
(c) Please define regional and national licenses.  How will the requirements associated
with these licenses be applied to foreign-in vested  insurance companies, especially in
the light of China’s Services Schedule commitments relating to geographic coverage
and branching?
(d) Please confirm that China’s capitalization and licensing requirements apply to both
foreign and domestic insurers.
(e) Can both foreign-invested and domestic insurers receive national licenses?
5. CIRC, a relatively small agency, faces the substantial task of expanding insurance regulation
to a nationwide system, with increasing participatio n by foreign companies.  Please describe ways in
which interested WTO Members or the private sector can assist CIRC through technical assistance or
capacity building, especially in the area of licensing.
II. MOTOR VEHICLE FINANCING
6. China, through the People’s Bank of China, has released for comment draft Management
Rules for Auto Loan Institutions  necessary to implement its commitment on motor vehicle financing
by non-bank financial institutions.  The United States has serious concerns about the consistency of
these draft rules with China’s services commitments, and it has previously raised those concerns with
China.
(a) Please provide an update on the status of this matter.S/FIN/W/19
Page 3
(b) China committed to permit market access in this sector upon its accession to the
WTO.  Please provide an indication of when China anticipates issuing these rules in
final form.
III. LICENSING
7. Paragraphs 307 and 322 of the Working Party Report require China to publish all of its
licensing procedures and conditions.  Please identify each services sector for which this information
has been published, and indicate where this information has been published.
IV. TRANSLATIONS OF MEASURES
8. In paragraph 334 of China’s Working Party Report, China committed that it “would make
available to WTO Members translations into one or more of the official languages of the WTO all
laws, regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or the
control of forex, and to the maximum extent possible would make these laws, regulations and othermeasures available before they were implemented or enforced, but in no case later than 90 days after
they were implemented or enforced.”  To date, China has not provided translations of several
measures pertaining to trade in services, including those listed below, most of which were
implemented more than 90 days ago:
(a) Measures on Administration of Representative Offices of Foreign Financial
Institutions;
(b) Measures on Administration of Business Networks in Same City Set Up by
Commercial Banks;
(c) Implementing  Rules on Administration of Foreign Exchange Purchases by Domestic
Residents;
(d) Administrative Measures on International Telecommunications Entry/Exit Stations;
(e) Regulation on Foreign Investment in Civil Aviation Industry;
(f) Interim Regulation on Establishment of Foreign-Invested Printing Companies;
(g) Provisional Regulation on the Administration of Internet Publishing;
(h) State Council Decision on the Revision of the Regulations on the Administration of
Travel Agencies; and
(i) Regulation on the Administration of Overseas Intermediary Employment Agencies.
9. Please provide translations of these measures in advance of the October 21-25, 2002 meeting
at which the Council for Trade in Services and the Committee on Trade in Financial Services will be
reviewing the implementation by China of the WTO Agreement and the relevant provisions of
China’s Protocol of Accession.
__________