Institutional opening-up to pay dividends

Institutional opening-up to pay dividendsDeep transition expected to strengthen nation's financial system and equip banks in supporting expansion of Chinese companies overseasBy JIANG XUEQING | China Daily | Updated: 2026-03-23 09:14

MA XUEJING/CHINA DAILY

China is accelerating a deeper phase of financial opening-up, shifting beyond market access toward a new era of "institutional opening" anchored in global standards for rules, regulation, governance and financial infrastructure.

This is a transformation that is expected to strengthen the country's modern financial system while equipping banks to better support Chinese companies expanding along reconfigured global industrial chains.

The transition gained particular momentum in 2025, widely seen as a pivotal year for China's financial reform agenda. Financial opening is evolving from factor-based opening toward institutional opening centered on rules, systems and financial infrastructure, said Alex Jiang, financial liberalization task force leader for EY China.

He noted that the latest reforms place a greater emphasis on quality while opening-up efforts increasingly target institutional alignment with high international standards.

The People's Bank of China, the country's central bank, in conjunction with financial regulators, has continuously refined the pre-establishment national treatment plus negative list system for foreign investment in the financial sector, encouraging qualified foreign financial institutions to participate in pilot programs for new financial services and authorizing multiple foreign banks to act as renminbi clearing banks. As China deepens financial opening, foreign banks have become an important force within China's banking industry.

As of end-June 2025, there were 42 locally incorporated foreign banks operating in China. The shareholders of these banks hailed from 14 different countries and regions, according to an EY report released in February.

In recent years, a growing number of foreign banks have continued to increase their investment in China. In August 2025, the National Financial Regulatory Administration announced that Fubon Bank (Hong Kong) Ltd had received approval to establish a branch in Shenzhen, Guangdong province. A month later, the regulator's Shenzhen office gave the nod to the Shenzhen branch of Banco Santander to commence operations.

Zeng Gang, chief expert and director of the Shanghai Institution for Finance and Development, said foreign banks' operations in China have gradually shifted from expanding scale to pursuing more targeted and in-depth development. In 2025, several foreign banks adjusted their retail business strategies in China, increasing investment in next-generation wealth management branches or private banking centers in core cities to serve high-net-worth clients. Cross-border finance and green finance have also become key areas of focus.

Analysts believe that as China steadily expands institutional opening-up in the financial sector, foreign institutions will be better positioned to leverage their advantages, deepen their presence in the Chinese market, and introduce mature international practices to China's banking industry.

Speaking at a news conference on March 6 during this year's two sessions, Pan Gongsheng, governor of the PBOC, said financial opening is an important component of China's broader reform and opening-up agenda. The central bank has actively promoted high-level financial opening since 2025 while balancing openness with security and deepening participation in global financial governance.

The PBOC has also been advancing the internationalization of the RMB, providing both domestic and overseas market participants with more diversified currency options. It has improved institutional arrangements and financial infrastructure for cross-border RMB use, gradually expanded bilateral local currency swap agreements, and supported the use of swap funds for cross-border trade and investment. Efforts to develop the offshore RMB market have strengthened intrinsic market demand for the currency, Pan said.

The RMB has become the largest settlement currency for China's cross-border payments, the world's second-largest trade financing currency and the third-largest payment currency globally, while ranking third in weight in the International Monetary Fund's Special Drawing Rights basket. This has facilitated cross-border trade and investment activities while helping reduce exchange rate risks and transaction costs.

The PBOC issued a notice on Feb 26 supporting domestic banking institutions in conducting cross-border interbank RMB financing with overseas institutions. Industry experts noted that the measure will help banks provide liquidity to the offshore RMB market, meet overseas demand for RMB funding, promote RMB internationalization and support the development of offshore RMB markets.

In addition, the PBOC has worked with financial regulators to deepen financial market connectivity and cross-border payment system interconnection. By the end of last year, overseas institutions and individuals held more than 10 trillion yuan ($1.45 trillion) in onshore RMB financial assets. In 2025, governments, international development institutions, financial institutions and large corporations issued over 170 billion yuan of panda bonds, with the outstanding volume of panda bonds rising 34 percent year-on-year, Pan said.

For example, Bank of China has continued to support institutions and multilateral organizations in countries participating in the Belt and Road Initiative to raise financing through panda bonds.

In March 2025, acting as lead underwriter and bookrunner, BOC assisted African Export-Import Bank in issuing 2.2 billion yuan of panda bonds in the China Interbank Bond Market. In July the same year, it helped Hungary issue 5 billion yuan of panda bonds, and in October 2025 and February 2026 it assisted Kuala Lumpur-based CIMB Bank Berhad in making two issuances of panda bonds, totaling 6 billion yuan.

As China deepens opening-up to foreign financial institutions and policy dividends continue to emerge, foreign banks are accelerating strategic transformation and entering a new stage of development in China, the EY report showed.

At the same time, Chinese banks' overseas expansion is strengthening the foundation of globalized services and entering a new phase characterized by structural optimization and quality improvement.

As the Chinese bank with the broadest international footprint, the BOC operates branches in 64 countries and regions, including 45 BRI partner economies. The bank has supported more than 1,400 corporate credit projects across countries participating in the BRI, providing over $420 billion in cumulative financing to meet diverse needs spanning infrastructure development, the digital economy, industrial upgrading and public welfare improvements.

One notable example is the Simandou iron ore project in Guinea, which officially began production in November. With total investment exceeding $20 billion, the integrated project covering mining operations, railways and port facilities is expected to produce up to 120 million metric tons of iron ore annually. The IMF estimates the project could boost Guinea's gross domestic product by 26 percent by 2030.

Drawing on its global service network, BOC has coordinated resources across its domestic and overseas branches to rapidly complete client engagement, project approval and agreement negotiations, ensuring financing is secured in time for construction. The bank has since provided comprehensive financial services for the project, including domestic and overseas account management, foreign exchange settlement and trading, cross-border RMB transactions, overseas payroll services and letters of credit, helping ensure stable and sustainable operations.

Chinese lenders are also helping companies navigate currency risks as they expand overseas.

A leading Chinese auto parts manufacturer with production and sales networks across multiple markets, for instance, faces exposure to exchange rate fluctuations among major and minor currencies. To help manage these risks, China CITIC Bank set up a dedicated service team that conducted multiple on-site visits to analyze the company's currency exposure, identify sources of foreign exchange risk, assess market trends and design tailored hedging strategies.

Starting in April, the bank executed a series of forward foreign exchange transactions totaling more than 70 million euros ($81.4 million), effectively helping the company hedge its exchange rate exposure.

In addition, China CITIC Bank has deepened cooperation with China Export & Credit Insurance Corporation to build a comprehensive insurance policy financing system, providing strong financial support for companies expanding overseas. The two sides have also expanded digital cooperation, enabling online insurance and financing services and automated verification of policy information through data exchange, greatly improving business processing efficiency for enterprises.

Today, the internationalization of Chinese banks is evolving from the "following clients abroad" model, focused mainly on supporting Chinese companies overseas with basic financial services, toward deeper localized operations and integrated financial services. Their role in serving enterprises has also expanded beyond financing providers to become strategic partners supporting China's industrial upgrading and ecosystem-based globalization, said Zeng of the Shanghai Institution for Finance and Development.

"The driving forces behind this shift come from multiple levels," he said. "Chinese companies' outward investment continues to expand, the internationalization of the RMB is steadily advancing, and demand for cross-border RMB settlement is growing, giving Chinese banks differentiated competitive entry points. The combination of these factors means the overseas expansion of Chinese banks has strong certainty and considerable room for growth."

jiangxueqing@chinadaily.com.cn