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China commemorated the 75th anniversary of the founding of the People's Republic of China in 2024. We pooled strength from Chinese modernization, kept in mind both domestic and international imperatives and made steady progress in achieving the goals of the 14th Five-Year Plan.
In brief
- Finance is a top priority of the nation, the lifeblood of the national economy, and an integral part of the country’s core competitiveness. It plays a pivotal role in implementing national strategies and serving the real economy.
- The opening-up is a defining feature of Chinese modernization, and the capacity for opening-up shall be enhanced while expanding international cooperation to develop new systems for a higher-standard open economy.
Globally, the year saw a fast-changing global landscape with prolonged geopolitical conflicts and global supply chains restructured amid turbulence and transformation. Concurrently, the Global South experienced a swift ascent, with developing nations, exemplified by the expanded BRICS members, joining forces to address and navigate global challenges collaboratively.
In 2024, domestically, China commemorated the 75th anniversary of the founding of the People's Republic of China. We pooled strength from Chinese modernization, kept in mind both domestic and international imperatives, and made steady progress in achieving the goals of the 14th Five-Year Plan. In the financial sector, the Third Plenary Session of the 20th Central Committee held in July 2024 emphasized the critical role of finance in the overall modernization with Chinese characteristics, highlighting the development goals of deepening reform of the financial system and promoting high-standard financial opening-up.
China made considerable progress in the opening-up of its financial sector in 2024. Significant policy adjustments were made, laying a solid foundation for building a more robust and efficient financial system aligned with international standards. As more foreign-funded financial institutions settled in China, local financial market saw new growth drivers in pursuing diversified development. Remarkable results were achieved in product and service innovation and cross-border cooperation, representing enhanced maturity, stability and innovation capabilities of China's financial market.
The report sets out some key events related to the reform and opening-up of the financial sector during the year, aiming to provide readers with comprehensive and visualized information of China's financial sector opening-up efforts in 2024.
In 2024, outbound direct investment (ODI) continued to keep the fast growth momentum. According to public data from the Ministry of Commerce of China, the London Stock Exchange Group and other sources, China's total ODI across all sectors reached US$124.4 billion in the first three quarters of 2024, with a year-on-year growth of 9%.
As Chinese enterprises actively explore overseas markets and embark on the journey of globalization, it is of paramount importance to acquire robust support from financial institutions. The financial sector's ODI in the first three quarters of 2024 has caught up with the total for the entire year of 2023, with an annualized growth of 35% compared to the previous year.
ODI value in China's financial industry
$177m
In 2023 (in USD)
$239m
In 2024 (in USD)
Source: Monthly brief statistics from the Ministry of Commerce of China, summarized by EY
Note: 2024 data is annualized based on the statistics for the first three quarters of 2024 disclosed by the Ministry of Commerce.
In terms of M&A transaction value, the financial service sector has seen a significant surge in overseas M&A business in the first three quarters of 2024, reaching USD2 billion. This represents a year-on-year increase of 320%, ranking first across all industries. Particularly in countries participating in the Belt and Road Initiative, the financial services sector ranks among the top three in terms of M&A transaction quantity.
China has established itself as a major financial power, when measured by several core indicators such as the scale of banking assets, insurance premium income, stock market capitalization, bond market balance and the degree of currency internationalization. However, we must soberly recognize that our financial development still faces the reality of being "large but not strong“. While leading in scale-related indicators, there remains significant room for improvement in key areas such as the quality of financial development, resource allocation efficiency, service effectiveness and risk resilience.
- Actively participate in global financial governance. Fully engage in the adjustment and formulation of international economic and financial rules and standards, and actively lead the global economic agenda, to enhance China's position and influence in the international financial system.
- Prudently and steadily advance the internationalization of RMB. Further actively promote cooperation in areas such as international settlement in RMB, bilateral local currency swaps, offshore clearing, and multilateral central bank digital currency cross-border payments, and accelerate RMB internationalization through platforms such as the BRICS mechanism.
- Continue to optimize the business environment for foreign investors, actively introduce foreign institutions with unique features and advantages, and further improve the domestic financial institution system. Provide a clear, stable and predictable market environment for foreign investors, enabling foreign capital to “enter and stay”, and fully leverage the “catfish effect” of foreign investment.
- Equally promote “bringing in” and “going global” initiatives, advance the construction of an international network of excellent financial institutions in China, and safeguard Chinese enterprises going global.
- Facilitate cross-border trade and investment and financing. Continue to expand and improve the interconnection mechanism to enable highly smooth flow of capital, goods, personnel, services and data, while ensuring national economic and financial security.
Summary
Looking ahead to 2025, we believe that China will firmly maintain the pace of financial reform and opening-up, actively respond to internal and external challenges, and introduce proactive policies, making great strides on the journey to becoming a financial powerhouse. EY financial service teams will continue to track the milestones of China’s financial opening-up and provide updated in-depth policy interpretations for investors at home and abroad.