VZCZCXRO4606
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3210/01 2330926
ZNR UUUUU ZZH
P 200926Z AUG 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 9396
INFO RUCPDOC/USDOC WASHDC
RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 003210 
 
SIPDIS 
SENSITIVE 
 
FOR EAP/CM PETER SECOR/JOY YAMAMOTO 
USDOC FOR ITA/MAC/KASOFF/MELCHER/KARNAK 
USDOC FOR ITA/MAS/ESTRADA 
USDOC FOR ITA/IA/SPOONER AND LORENTZEN 
STATE PASS USTR 
USTR FOR STRATFORD/WINELAND/MAIN 
TREASURY FOR MANAGING DIRECTOR DAN WRIGHT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN CH
SUBJECT: AUSTR STRATFORD DISCUSSES ENTERPRISE ANNUITIES 
WITH CBRC 
 
THIS CABLE IS SENSITIVE BUT UNCLASSIFIED.  NOT FOR 
INTERNET DISTRIBUTION. 
 
¶1. (SBU) Summary. On Friday July 18, Assistant USTR for 
China Tim Stratford and USDOC DAS Ira Kasoff discussed 
enterprise annuities with China Banking Regulatory 
Commission (CBRC) Director-General Li Fuan.  Li Fuan 
outlined the current state of affairs regarding 
enterprise annuities and agreed that further public and 
government education about retirement annuities was 
needed.  Regarding draft regulations by the Chinese 
Insurance Regulatory Commission (CIRC) that included 
provisions that appear to limit investment by foreign 
companies in Chinese insurance companies, Li noted that 
these provisions were currently under discussion between 
CBRC and CIRC.  On credit cards, where China UnionPay 
currently is the only domestic credit card organization 
in China, Li noted that China had just published a new 
anti-monopoly law and the government now "should have a 
clear position" on UnionPay's monopoly status. End 
Summary. 
 
¶2. (SBU) China Banking Regulatory Commission (CBRC) 
Director General (DG) Li Fuan outlined the current state 
of affairs regarding enterprise annuities.  To date, a 
committee chaired by the Ministry of Human Resources and 
Social Security (MOHRSS), on which Li represents the CBRC, 
had given licenses to 39 banks to provide various 
services. Li said CBRC believed (and hoped) eventually 3- 
5 large banks would dominate the sector, but wanted the 
market to sort this out. 
 
¶3. (SBU) Unlike MOHRSS, CBRC supported a continuously 
open application process for new entrants.  He added that 
licenses of three or four banks had recently been 
withdrawn and CBRC is encouraging MOHRSS to provide these 
licenses to new entrants without waiting for the next 
formal open application period.  MOHRSS and CBRC viewed 
the situation differently: the former saw the market as 
still small, so no need for more entrants, while CBRC 
recognized the huge potential market and the need for 
more companies.  Finally, Li acknowledged that China at 
this time offered no tax benefit for enterprise annuities 
(either for companies or workers), and suggested that the 
current strong budget position could enable it to do so. 
 
¶4. (SBU) Li agreed that further public and government 
education about retirement annuities was needed, and 
hoped that more Chinese companies would face pressure 
from their workers to copy their competitors' programs, 
resulting in faster growth of the industry.  He suggested 
the USG continue to use the SED?s discussions on 
rebalancing growth to encourage China's development of 
pension systems, for which China's central and local 
governments needed additional advice and assistance. 
When DAS Kasoff suggested a tentative offer of a 
technical assistance program on enterprise annuities, DG 
Li responded that government officials and regulators 
would definitely welcome it.  Li cited Shanghai, where 
the government has offered an annuity program to its 
employees for more than ten years, as a useful model. 
 
¶5. (SBU) Regarding draft regulations by the Chinese 
Insurance Regulatory Commission (CIRC) that appear to 
limit investment by foreign companies in Chinese 
insurance companies, Li noted that Chinese banks were the 
major contributor to insurance sales; for example, banks 
sold about one-half of Chinese life insurance 
policies.  He argued that banks should be more involved 
in the insurance sector, so they can collect more than 
agents' fees, and supported formation of joint 
ventures.  Li said CBRC and CIRC were discussing CIRC's 
proposed regulations that would prohibit a wholly-owned 
foreign insurance company operating in China from forming 
a J-V with a Chinese bank to offer insurance. 
 
¶6. (SBU) On credit cards, where China UnionPay currently 
is the only domestic credit card organization in China, 
Li noted that China had just published a new anti- 
monopoly law and the government now "should have a clear 
 
BEIJING 00003210  002 OF 002 
 
 
position" on UnionPay's monopoly status.  While China 
lacked sufficient legal and regulatory clarity for many 
aspects of the credit card business, Li was doubtful that 
the bureaucratic logjam (primarily between PBOC and CBRC) 
over the supervision and regulation of credit cards would 
be broken soon. 
 
¶7. (SBU) For example, while CBRC supervises consumer 
lending, PBOC continues to insist that it regulate credit 
card lending given its jurisdiction over the payments 
system.  One reform under consideration was for the CBRC 
to allow banks to form legally independent and licensed 
credit card companies.  The State Council had agreed to 
CBRC's proposed use of the Tianjin pilot project as a 
model, and CBRC was "working on the details."  Li said 
amendment of the current PBOC requirement for foreign 
banks to move their credit and debit card data processing 
operations to China in order to receive a license was 
still under discussion; some agencies believed local 
regulators should have responsibility and that processing 
of "core data" should be in China. 
 
RANDT