Establishing a Foreign Owned Financial Institution in China

[ By Adam Pilger and Richard Hoffmann, Dezan Shira & Associates ]

Setting up a foreign-owned bank in China can be a daunting task, requiring strict adherence to the China Banking Regulatory Commission?s ?Measures for the Implementation of Administrative Licensing Items Concerning Foreign Funded Financial Institutions.? While the CBRC?s requirements for establishing foreign-funded financial institutions are lengthy, and oftentimes inexplicably repetitive, they can be distilled down to three manageable components: setting up the representative office, applying for a business license, and establishing a branch.

Setting up the representative office

Representative offices are necessary vehicles for setting up a foreign-funded bank in China (the RO must be held for a period of two years prior to implementation of licensing for a foreign-funded bank). An RO allows foreign staff to obtain required working visas and residence permits and allows the business to legally employ a local staff as well. It paves the way for more extended and substantial future investment, but also has significant limitations?the largest being that an RO cannot engage in direct business activities (for more on representative offices, please see China Briefing?s ?Setting Up Representative Offices in China” from the bookstore at http://shopping.china-briefing.com).

In order to set up an RO, the foreign-funded bank will need to meet the following six conditions:

(1) The foreign-funded bank is located in a country with a sound financial regulatory system
(2) The bank was established upon approval of the financial authority of the country or region where it is located, or it is a member of an association of the financial sector
(3) If a foreign-funded financial institution applies for establishing a general representative office within China, it shall have established five or more branch institutions (including representative offices) within China
(4) The bank demonstrates favorable business performance with no record of gross violations
(5) The bank has effective anti-money laundering measures
(6) Other requirements as prescribed by the CBRC

Next :
China?s Financial Centers


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

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