 
. /. RESTRICTED  WORLD TRADE  
ORGANIZATION  S/FIN/W/42 
17 November 2004 
 
 (04-4966) 
Committee on Trade in Financial Services Original:   English 
  
 
COMMUNICATION FROM AUSTRALIA 
 
Transitional Review Mechanism in connection with Paragraph 18 of 
 
the Protocol on the Accession of the People's Republic of China  
 
 
 The following communication, dated 16 Novemb er 2004, from the delegation of Australia is 
being circulated to the Members of the Committee on Trade in Financial Services. 
  
_______________
 
 
  
1. Australia acknowledges the difficult work undertaken by China to implement its WTO 
commitments for financial services.  Australia re cognises that China’s accession to the WTO and its 
own economic reform program has instigated a welc ome process of liberalisation with a view to 
greater access for foreign firms across the fina ncial services sector.  The competitive stimulus and 
enhanced efficiency that is being engendered in the financial services sector will be an important 
driving force in the growth of that sector and of the broader Chinese economy. 
2. Australia recognises the importance of the tran sitional review, as mandated under paragraph 
18 of China’s accession protocol, as a useful mechanism in clarifying and assisting in the effective 
implementation of China’s financial services commitments.  In this context, Australia wishes to clarify China’s implementation of banking comm itments as it relates to foreign banks off-shore 
borrowing. 
B
ANKING  
3. Australia wishes to clarify some recently prom ulgated procedures dealing with limitations on 
foreign banks borrowing off-shore to loan to busin esses operating in China.  Australia understands 
that the Procedures on the Administration of Foreign Debt s of Foreign Capital Banks in the Territory  
issued on 27 May 2004, in addition to the impl ementing rules released in June by the State 
Administration of Foreign Exchange (SAFE), set limitations on the amount of foreign exchange 
funding foreign banks may acquire from overseas,  through the imposition of a quota system.  
 
4. These new procedures, combined with the provisions contained in Article 30 of the 
Administrative Regulations on Foreign Invested Financial Institutions , which sets a 70 per cent limit 
on foreign bank holdings of forei gn currency deposits, will increase costs and restrict the market 
access of foreign banks, particularly those with sm aller operations in China.  Furthermore, it will 
adversely impact on competition in the market and reduce the access of Chinese businesses to the 
most competitively priced funding.   
 S/FIN/W/42 
Page 2  
 
 5.  Could China please advise on whethe r the quota system outlined in the Procedures on the 
Administration of Foreign Debts of Foreign Capital Banks in the Territory  is a short-term measure?  
Could China explain how the quotas for foreign ex change funding will be determined, and how the 
new regulations will be implemented nationall y?  Could China please explain how these new 
regulations align with China’s GATS nationa l treatment and market access obligations? 
__________  
 