November 6, 2014

The Honorable Barack Obama
President of the United States
The White House
1600 Pennsylvania Ave NW
Washington, D.C. 20500

Dear President Obama,

The ENGAGE CHINA[1] coalition thanks you for your continuing efforts to strengthen one of the most important bilateral relationships in the world today – the U.S.-China economic relationship.  Most recently, we are very encouraged by your Administration’s ongoing efforts to negotiate a Bilateral Investment Treaty (BIT) between the two countries.

In anticipation of your upcoming November 10-12 trip to Beijing and meeting with Chinese President Xi Jinping, we write to call your attention to the critical importance of accelerated reform and modernization of China’s financial system, including a level playing field for foreign participants in China’s financial services marketplace.  Additionally, we ask you to raise with President Xi the mounting urgency of addressing threats to cybersecurity.

We believe a high-quality BIT can be an important tool for achieving financial reforms in China. The successful conclusion of a treaty will strengthen the bilateral investment climate and provide important investment protections for U.S. investors.  Perhaps more importantly, a BIT offers a unique opportunity to address important market access impediments and equity cap limitations the industry currently faces when operating in China.  A high-standard BIT could also reduce the preferential treatment enjoyed by Chinese state-owned financial services providers.

As part of the Third Party Plenum, China recognized the need to reform its financial system and has taken steps to reform and accelerate modernization and liberalization. A BIT can be seen as analogous to China’s 2001 accession to the WTO, which spurred significant market-opening reforms and accelerated economic growth.  A modern and competitive financial system, one that includes full participation by non-Chinese banks, is imperative for China to continue to meet its domestic growth needs.

Increased competition from non-Chinese banks would also align with the Third Party Plenum’s pledge to allow market competition to play a “decisive role in the allocation of resources.” Such competition would naturally allow for increased competition between U.S. and Chinese banks, as Chinese banks seek to re-calibrate their activities to market-focused activities.  This shift will undoubtedly help to drive further market-opening reforms and liberalization.

Further, more fully developed capital markets would provide healthy competition to Chinese banks and facilitate the development and growth of alternative retail savings products such as mutual funds, pensions, and life insurance products.  And by broadening the range of funding alternatives for emerging companies, more developed capital markets would greatly enhance the flexibility and, therefore, the stability of the Chinese economy.

In our view, U.S. efforts regarding faster reform and modernization of China’s financial sector should focus on the following priorities:

  • The negotiation of a high-standard U.S.-China Bilateral Investment Treaty that creates certainty and open markets for investors in both markets;
  • The critical importance of open commercial banking, securities, futures, insurance, pension, and asset management markets to promoting the services- and consumption-led economic growth that China’s leaders seek;
  • The clear benefits to China of increased market access for foreign financial services firms – including allowing full ownership of banking, securities, futures, insurance, asset management and other financial companies – which include the introduction of broad financial sector expertise, technology, and best practices;
  • Furthering China’s commitments to non-discriminatory treatment with regard to licensing, corporate form, and permitted products and services – for example, China should issue reports regarding applications and approvals of domestic and foreign-invested insurance providers for concurrent branch licensing;
  • Non-discriminatory national treatment with regard to regulation and supervision – for example, U.S. insurance firms should enjoy the same opportunities with regard to Internet distribution of products and services that Chinese companies already enjoy;
  • Opening up all categories (asset managers, trustees, record keepers and custodians) of Enterprise Annuity Licenses (China’s equivalent to the 401k) to qualified companies, including foreign invested companies;
  • Regulatory and procedural transparency; and,
  • Further increasing institutional investors’ participation in China’s capital markets by expanding the Qualified Foreign Institutional Investor (QFII) and Qualified Domestic Institutional Investor (QDII) programs.

By providing financial products and services that help China’s citizens and businesses invest, insure against risk, provide for retirement, raise standards of living, and consume at higher levels, foreign financial institutions – including U.S. providers – would help China develop an economy that is less dependent on exports, more consumption-driven and, therefore, more stable and sustainable over the long-term.

Again, thank you for your continued work to strengthen the relationship between the United States and China.  The ENGAGE CHINA coalition looks forward to working with you to ensure that American households, manufacturers, farmers, and services providers benefit from the increasingly important U.S.-China relationship.


The Engage China Coalition
American Bankers Association
American Council of Life Insurers
American Insurance Association
The Council of Insurance Agents and Brokers
The Financial Services Forum
The Financial Services Roundtable
The Futures Industry Association
Insured Retirement Institute
Investment Company Institute
Property Casualty Insurers Association of America
The Securities Industry and Financial Markets Association


The Honorable Joseph Biden, Vice President of the United States;
The Honorable Jack Lew, Secretary of the Treasury, U.S. Department of the Treasury;
The Honorable John Kerry, Secretary of State, U.S. Department of State;
The Honorable Penny Pritzker, Secretary of Commerce, U.S. Department of Commerce;
Ambassador Michael Froman, United States Trade Representative, Office the United States Trade Representative

[1] ENGAGE CHINA is a coalition of twelve financial services trade associations united in our view that active engagement and cooperation between the United States and China remains the most constructive means of ensuring that the citizens of both nations mutually benefit from the growing bilateral economic relationship.