CNBC:

I have two questions. First, what are the priorities of reform and opening up in the financial sector? Second, fund management companies should establish Party organizations, as stated by the newly revised Measures for the Supervision and Administration of Managers of Publicly Offered Securities Investment Funds, which took effect on June 20. With recent changes to the international political environment, foreign companies will worry more about data security and ties to the Party. Meanwhile, Premier Li Keqiang noted again in May that China will continue its reform and opening up; and he has also mentioned financial reforms and opening up over the past years. In this context, how will the above-mentioned requirements be implemented in foreign fund management companies? 

Chen Yulu:

I'll take the first part of your questions, and the rest will be taken by Mr. Li Chao.

Regarding financial reform and opening-up, I believe that reform and opening-up is a sure path for financial modernization. Since the 18th CPC National Congress, China has seen remarkable progress in reforming and opening up its financial sector, and its financial system remains robust, providing strong support for the high-quality development of the national economy and the country's modernization process.

Looking forward, China's financial system will resolutely follow the path of financial development with Chinese characteristics, strive to achieve the sector's long-term stability, and stay committed to continuous reform and opening-up. To further carry out financial reform and opening-up, we need to focus on the following aspects:

First, we need to always uphold the CPC Central Committee's centralized and unified leadership in the financial sector and improve the financial administration system. Regulatory bodies' roles should be given full play in fulfilling their responsibilities for regulation and risk management, and negligence and the dereliction of duty shall be held to account. We will speed up introducing regulations on local financial supervision and administration, specify the duty and power of local financial regulatory bodies, and achieve high-level compatibility in financial regulation between central and local governments.

Second, we should ramp up efforts to improve the governance of financial data and improve our fintech capacity. Dynamic monitoring shall be rolled out comprehensively toward financial operations and risk conditions.

Third, the market access threshold of financial institutions should be refined. Regulatory efforts will be made to further look through financial institutions' shareholders and strengthen the work to identify and crack down on illegal financial activities.

Fourth, we need to improve the compatibility between financial systems and the real economy, optimize direct and indirect financing, and promote the reform and restructuring of small- and medium-sized financial institutions. Illicit cross-regional and out-of-scope financial activities shall be eliminated.

Fifth, we need to improve the finance-related rule of law and remedy the weak points of our institutions. All financial activities will be kept consistent with the rule of law, and more efforts should be made to expedite the introduction of the law on financial stability. 

In terms of expanding high-quality financial opening-up, on the premise of keeping things safe and under control, we need to align with international standards, promote higher-level opening-up based on the negative list, and realize systemic and institutional openness.

First, we will further improve the management model based on pre-establishment national treatment and negative list. We will carry out the Regional Comprehensive Economic Partnership (RCEP) and align with high-level international financial rules. We will also make preparations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA).

Second, we will provide more convenience for overseas investors in investing activities in China's financial market. We will offer more asset types for them to invest in, improve relevant systems and rules, and keep optimizing the business environment.

Third, we will introduce a regulatory system that meets the requirements of high-level financial opening-up. We will improve the professionalism and efficacy of financial regulation, introduce various "firewalls," and resolutely forestall systemic financial risks.

Thank you.

Li Chao:

I'll take your second question. In accordance with the decisions being made by the CPC Central Committee on opening up the financial sector, we have seen positive progress over the years in the opening-up of the capital market and securities and fund industry, including the market itself and its access threshold.

In terms of the market access threshold, for example, the foreign capital limit in China's public offering funds was raised to 51% in 2018, and the limit was completely removed in 2020. Currently, there are 48 public offering funds in China that have foreign investors holding or controlling shares. Forty-five of these funds are joint ventures, and the remaining three are owned wholly by foreign investors. In this sense, fund management companies that are invested by foreign businesses are a very important part of China's public offering funds sector.

Recently, the CSRC issued the measures for the supervision and administration of publicly offered securities investment fund managers and the relevant supporting rules. This set of measures mainly aims to clarify regulatory requirements at every link for full coverage, which is an international standard. The measures included the requirement for such funds to establish Party organizations, which is in accordance with China's relevant laws and regulations, including the company law. So, we think this requirement is in line with the principles regarding company governance, rather than being against them or becoming their replacement. As for the data security issue you just mentioned, I can say responsibly that you need not worry at all because the establishment of Party organizations and data security are not associated with each other. Before the issuance of the measures, some publicly offered funds had set up Party organizations. In practice, Party organizations play a very positive role in the healthy and regulated development of companies. Going forward, we will continue to insist on reform and opening up and make more efforts unswervingly. Thank you.