(Yicai Global) May 29 -- Foreign financial institutions wanting to do business through the internet with clients in China need a license from the country's authorities, according to a senior official. Licenses cannot be used transnationally.

"Institutions must be licensed to provide financial services in China," Sun Tianqi, chief accountant at the State Administration of Foreign Exchange, told the 2019 Financial Street Forum today. "Those that have foreign licenses cannot provide relevant financial services to Chinese customers through digital platforms." 

"Personally, I would prefer that foreign institutions be required first to set up a commercial presence [in China] before they provide financial services," he said. "This means that, in the short term, China will not open up its cross-border financial services under the cross-border delivery model." 

Sun said that this is mainly because China's legal system is not yet perfect, the market is immature, and the current regulatory capacity is still weak, while coordinated supervision mechanisms are not sound.

He believes that "the opening up of cross-border financial services under the cross-border delivery model should be considered in the near- and medium-term." The initial opening up can use a 'positive list' approach, and, with increasing openness, a 'negative list' can be applied step by step. 

Financial services under the cross-border model have led to such issues as illegal financial activities, though they have eased payments and settlements. For example, some cross-border service platforms provide trading and intermediary services for Chinese equities, Hong Kong stocks and bitcoin for Chinese customers without local licenses, and even help people take part in illegal activities such as overseas gambling.

Sun said that the supervision of China's financial services sector should be strengthened during the opening up process, and an effective regulatory system should be established to ensure smooth implementation of opening-up policies.

He added that international regulatory cooperation needs enhancing to form global standards and combat illegal cross-border financial services. "Openness demands effective cooperation on worldwide regulations," Sun said.

Editor: Tang Shihua