Australia: China-Australia free trade agreement brings greater market access for Australian financial services providers

Last Updated: 24 November 2014
Article by Adeline Hiew

Most Read Contributor in Australia, September 2016

After a decade of negotiations, President Xi Jinping and Prime Minister Tony Abbott have concluded negotiations for an historical free trade agreement (FTA) between China and Australia, which looks set to allow Australian financial services providers unprecedented access to the Chinese market.

Trade and Investment Minister Andrew Robb and Chinese Commerce Minister Gao Hucheng signed a Declaration of Intent in respect of the FTA yesterday, undertaking to prepare the legal texts in both languages for official signing in 2015.

This article provides a summary of the provisions of the FTA that will be of particular application or importance to the Australian financial services industry. You can read about the FTA more generally here, and about its impact on Australia's Agribusiness sector here.

The financial services industry is set to benefit from the implementation of the FTA across the insurance, funds management, securities and futures, banking and private equity sectors. The commitments between the Australian and Chinese governments in the area of financial services are significant, and the FTA once implemented, will represent the most substantial access to the Chinese market granted outside of its agreements with Hong Kong and Macau.

A summary of the benefits to various areas of the financial services industry is set out below:

Financial services area

Benefits for doing business in China under the FTA


Access for Australian insurers to China's statutory third-party liability motor vehicle insurance market, without restrictions on the form of establishment or restrictions on equity.

Improved treatment for the establishment of Australian insurance company branches in China.

Funds management

Ability for Australian securities brokerage and advisory firms to provide cross-border securities trading accounts, advice, custody and portfolio management services to Chinese investors permitted to invest offshore.

(Note that outside of the FTA, Australia has been granted an initial aggregate quota of RMB 50 billion for access into the RMB Qualified Foreign Institutional Investor (RQFII) program. This program allows approved Australian financial institutions, such as fund managers, to make investments in RMB, into China's domestic equity and bond markets.)

Securities and Futures

Ability to establish a joint venture futures companies with a maximum  49% Australian ownership.

National treatment to be extended to Australian financial institutions for approved securitisation business in China.

Increase in foreign equity limits to 49% for participation in underwriting of domestic "A" and "B" shares and "H" shares (Hong Kong listed).


Removal of the minimum RMB100 million working capital requirement for branch subsidiaries of Australian banks in China.

Ability for Australian bank subsidiaries in China to engage in credit asset securitisation business under China's Financial Institution Credit Asset Securitisation Pilot Program (a first for foreign banks).

Reduction of the waiting period before an Australian bank can engage in local currency (RMB) services, from 3 years to 1 year

Removal of the 2 year profit making requirement which is a precondition to the provision of such services.

Private equity

Identified as an area for future cooperation- Australian private equity investments in China to be encouraged.

Each country has also agreed to review the bilateral taxation arrangements to facilitate trade and investment under the FTA, having regard to international taxation standards and mutual economic objectives. Areas of focus will be on double taxation and preventing tax evasion.

In addition, the FTA will provide for a financial services committee to be established, to provide Australian and Chinese financial services regulators with a regular forum in which to discuss topics of mutual interest, or to address financial services related issues arising from the bilateral relationship.

Specifically, the Australian Securities and Investments Commission (ASIC) and the China Securities Regulatory Commission (CSRC) have agreed to strengthen their cooperation and improve their understanding of each other's regulatory frameworks.

Against this backdrop , the People's Bank of China and the Reserve Bank of Australia have executed a Memorandum of Understanding to establish an RMB clearing arrangement in Sydney. This will provide a more direct method of executing cross border RMB transactions than is currently available.

Overall, the FTA provisions relating to financial services will provide Australian financial services industry participants with a number of new or increased business opportunities in China, and free up the making of financial investments between the two countries.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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