EU And US Dispute Chinese Rules On Financial Information Providers

by Mary Swire, for LawAndTax-News.com, Hong Kong

04 March 2008

It emerged on Monday that the European Union has formally requested consultations at the WTO over measures that affect the operation of foreign financial information suppliers in China.

New Chinese regulations, in place from 2006, require foreign financial information suppliers to supply their services through an entity designated by China’s regulatory authority. The regulations prohibit foreign financial information suppliers from directly soliciting customers for their services, requiring efforts to develop new customers to be conducted exclusively through the government-designated entity.

China likewise prohibits users of financial information services in China from directly purchasing services supplied by foreign suppliers. Furthermore, China prevents foreign financial information suppliers from establishing local operations in China to provide their services.

A Commission statement confirmed that:

"They (foreign financial information suppliers) are now required to operate through an agent that is a branch of Xinhua itself. Moreover, Xinhua has recently launched a financial information service in direct competition with foreign suppliers. The European Commission had tried to solve the issue through cooperation and dialogue, but without success."

The United States has also requested consultations at the WTO over this issue.

United States Trade Representative Susan C. Schwab announced earlier this week that the United States has requested dispute settlement consultations with China at the World Trade Organization (WTO) regarding China’s treatment of US suppliers of financial information services.

“China’s restrictive treatment of outside suppliers of financial information services places U.S. and other foreign suppliers at a serious competitive disadvantage,” Schwab explained, continuing: “We have raised this matter with China repeatedly, yet the problem has not been resolved. We hope the filing of our request for formal WTO consultations will lead to a swift resolution of this matter.”

She concluded: “It is not in China’s interest to restrict access to the high-quality, comprehensive financial information provided by foreign service suppliers,” Schwab added. “Financial market professionals in domestic and foreign banks, investment firms and other businesses in China need real-time access to this information from diverse sources – foreign and domestic – in order to make effective business decisions.”

Commenting on the matter on Monday, EU Trade Commissioner Peter Mandelson explained that:

"Competitive and open financial services information markets are the lifeblood of a strong financial sector, but China's rules have tipped the balance against foreign companies. I trust the EU and China will be able to resolve this issue amicably and to mutual benefit."

The relevant Chinese measures appear to breach China's GATS commitments on national treatment and market access, which require that foreign companies can operate in China and are not treated less favourably than local ones. It is also contrary to obligations not to cut back on existing rights for companies and to provide regulatory independence, which China committed to ensure at the time of its WTO Accession in 2001.

Commissioner Mandelson met with Xinhua President Tian Congming twice last year, in June and again in November, to discuss the issue. He has also raised the EU's concerns with Vice Premier Wu Yi and with the outgoing Minister of Commerce, Bo Xilai.

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