WASHINGTON (Reuters) - Republican U.S. senators on Tuesday called on the Trump administration to increase pressure on China to remove foreign ownership curbs that bar American financial companies from freely operating in the world’s second largest economy.
Foreign banks, securities firms and insurers seeking to conduct certain kinds of business in China are required to partner with local firms that retain a majority interest in the joint venture.
The arrangement has long frustrated Wall Street players operating in China - including Morgan Stanley (MS.N), JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N) - because it limits their ability to make strategic decisions and maximize profits.
In a letter sent to the administration and dated Tuesday, 16 Republican U.S. senators urged the government to seek a “timely” commitment from China to allow U.S. financial firms to own 100 percent of their Chinese operations as part of the U.S.-China Comprehensive Economic Dialogue - a forum created in April by President Donald Trump and Chinese President Xi Jinping to discuss pressing economic issues.
“Such restrictions effectively block U.S. financial companies from owning and controlling their investments as they do in almost every other market in which they operate,” the letter said.
“They also harm U.S. companies in other sectors of the economy, like manufacturing, that rely on the scale, scope and expertise of U.S. financial services providers to compete with Chinese competitors.”
The Chinese government has been gradually loosening foreign investment curbs as part of its pledge to open up the country’s capital markets, and in December unveiled plans to further liberalize joint venture rules - but did not provide details.
The U.S. financial services industry hopes to capitalize on President Donald Trump’s pro-business agenda and tough stance on China trade relations to push Beijing to follow through on its promise to allow greater market access.
The letter was addressed to Secretary of Commerce Wilbur Ross, Treasury Secretary Steve Mnuchin, National Economic Council director Gary Cohn, and U.S. Trade Representative Robert Lighthizer. The 16 senators who signed the letter included Tim Scott, who sits on the Senate Finance Committee and Mike Crapo, chairman of the Senate Banking Committee.
“China’s barriers to market entry have put U.S. financial institutions at a competitive disadvantage through numerous administrations,” said Kenneth Bentsen Jr., president and chief executive of the Securities Industry and Financial Markets Association trade group and chairman of the Engage China group, which has been lobbying on this issue.
“By tackling these barriers, we will give U.S. financial companies the same competitive rights given to Chinese companies operating in the U.S.,” Bentsen said in a statement.
Reporting by Michelle Price; Editing by Jonathan Oatis