CEPA and China's banking law: Conflicts and adjustments

China Review

Volumn 6, Issue 2, 2006, Pages 97-120

  Wang, Wei ^a,b  

^a FUDAN UNIVERSITY   (China)

^b UNIVERSITY OF HONG KONG   (Hong Kong)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 33750421132     PISSN: 16802012     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (114)

1. In this article, for the sake of convenience, "China" refers to mainland China (the main body of the People's Republic of China), while Hong Kong refers to the Hong Kong Special Administrative Region (HKSAR) under the People's Republic of China.
2. See General Office of the State Council, The Notice on Relevant Works for Implementing the CEPA, Guobanfa, No. 95 (2003), para. 1(1).
3. Hong Kong became a WTO Member in January 1995, http://www.wto.org/ english/thewto_e/whatis_e/tif_e/org6_e.htm.
4. See Trade Policy Review Body, Trade Policy Review, Hong Kong, China Report by the Government, WT/TPR/G/109, ¶¶41, 42 (18 November 2002).
5. CEPA, Main Text, http://www.tid.gov.hk/sc_chi/cepa/legaltext/files/ main_sc.doc (last updated 16 January 2006).
6. Ibid., Art. 21.
7. CEPA, Annex 4, http://www.tid.gov.hk/sc_chi/cepa/files/annex4_sc.doc (last updated 16 January 2006).
8. CEPA II, Main Text, http://www.tid.gov.hk/sc_chi/cepa/files/ sa_main_sc.doc (last updated 16 January 2006).
9. CEPA II, Annex 3, http://www.tid.gov.hk/english/cepa/files/ sa_annex3_e.doc (last updated 16 January 2006).
10. CEPA III, Main Text, http://www.tid.gov.hk/english/cepa/legaltext/files/ sa2_main_e.doc (last updated 16 January 2006).
11. CEPA III, Annex 2, http://www.tid.gov.hk/english/cepa/legaltext/files/ sa2_annex2_e.doc (last updated 16 January 2006).
12. CEPA IV, Main Text, http://www.tid.gov.hk/tc_chi/cepa/legaltext/files/ sa3_main_c.doc (last updated 29 June 2006).
13. CEPA IV, Annex, http://www.tid.gov.hk/english/cepa/legaltext/files/ sa3_annex_e.doc (last updated 29 June 2006). It must be noted that the CEPA IV Schedule does not contain any further financial service commitments.
14. Wei Wang, "CEPA: A Lawful Free Trade Agreement under 'One Country, Two Customs Territories'?", Law and Business Review of the Americas, Vol. 10, No. 3 (2004), pp. 647-66.
15. See CEPA (Note 5), ch. 4.
16. The Schedule of Specific Commitments on Services of the People's Republic of China, WT/ACC/CHN/49/Add.2 (1 October 2001), available in Compilation of the Legal Instruments on China's Accession to the World Trade Organization (Beijing: Law Press China, 2002), pp. 700-46.
17. It must be noted that in the CEPA II, the scope of banking services is broadened to include insurance agency business, although this is not listed in China's WTO Schedule.
18. GATS, available in The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations (Cambridge: Cambridge University Press, 1999), pp. 284-307.
19. See GATS, Art. XXVIII(j).
20. In the case of the supply of a service through commercial presence, owned or controlled by (1) natural persons of that Member; or (2) juridical persons of that other Member. See GATS, Art. XXVIII (m)(ii).
21. See CEPA, Annex 5, "Definition of 'Service Supplier' and Related Rules," ¶¶3.1.1, 3.1.2(2), http://www.tid.gov.hk/sc_chi/ cepa/files/annex5_sc.doc (last updated 16 January 2006).
22. In addition to the operation year requirement, there are other requirements for being a HKSS, e.g. profit tax, business premises, employment of staff. See ibid., ¶¶3.1.2(3) (4) (5).
23. Ibid., ¶3.1.2(2).
24. Notice to Service Suppliers No. 2/2003: Application Procedures for Certificate of Hong Kong Service Supplier, issued by the TID of the HKSAR Government, WT 324/9/5/7, ¶9 (14 November 2003).
25. See CEPA, Annex 5 (Note 21), Art. 7, and the Notice to Service Suppliers No. 2/2003: Application Procedures for Certificate of Hong Kong Service Supplier, issued by the TID of the HKSAR Government, WT 324/9/5/7, ¶14 (14 November 2003).
26. CEPA, Annex 4 (Note 7), footnote 2.
27. http://www.info.gov.hk/hkma/chi/press/2004/20041029c4.htm (29 October 2004).
28. http://www.standardchartered.com.hk/chi/news/2004/c_press_20040511.pdf (11 May 2004).
29. See Specific Commitments on Opening Service Trade Area, Table 1 of Annex 4 of the CEPA, http://www.tid.gov.hk/sc_chi/cepa/files/annex4_sc.doc (last updated 16 January 2006). The existing schedule of specific commitments under current CEPA is unilateral. There are only service commitments made by mainland China to the HKSAR. According to the arrangement, mainland China and the HKSAR will negotiate service commitments to be made by the HKSAR to mainland China, which will be contained in Table 2 of Annex 4 of the CEPA.
30. Prior to the CEPA, there were only four large banks in Hong Kong which had set up branches in China, i.e. the HSBC, Hang Seng Bank, Bank of East Asia and Bank of China Hong Kong Limited. See http://www.southcn.com/news/hktwma/jingji/200307040705.htm (4 June 2003).
31. http://www.china.org.cn/chinese/zhuanti/qkjc/688897.htm (26 October 2004).
32. http://finance.sina.com.cn/b/20040604/1658797123.shtml (4 June 2004);
33. http://www.gd.xinhuanet.com/newscenter/2004-06/22/content_2358044.htm (22 June 2004).
34. CEPA II, Annex 3 (Note 9).
35. CEPA III, Annex 2 (Note 11).
36. See WT/ACC/CHN/49/Add.2.
37. Panel Report on Canada - Term of Patent Protection, WT/DS170/R, ¶6.49, footnote 30 (stating that "the principle of effective interpretation ... reflects the general rule of interpretation which requires that a treaty be interpreted to give meaning and effect to all the terms of the treaty.")
38. Appellate Body Report, in Japan - Taxes on Alcoholic Beverages, WT/DS8/ AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, section D (stating that "the principle of effectiveness" is a fundamental interpretation principle)
39. Appellate Body Report, United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 21 November 2001, ¶131 and footnote 116 (interpreting the concept of "exhaustible natural resources" in line with the principle of effectiveness)
40. Appellate Body Report, United States - Restrictions on Imports of Cotton and Man-Made Fibre Underwear, WT/DS24/AB/R, adopted on 25 February 1997, section IV: 1, DSR 1997:I, at 24 (invoking the principle of effectiveness in treaty interpretation);
41. Panel Report, Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/R, adopted 12 January 2000, ¶4.609, 7.37 (stating that all terms must be given full meaning and must be interpreted to avoid inconsistencies and inutility);
42. Appellate Body Report, Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, ¶81 (stating that it is the duty of any treaty interpreter to give meaning to all provisions of a treaty);
43. Appellate Body Report, Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/AB/R, WT/DS113/AB/ R, adopted 27 October 1999, ¶133 (applying "the fundamental principle of effet utile" and stating that the treaty interpreter should give effect to a "legal operative meaning for the terms of the treaty");
44. Appellate Body Report, Argentina - Safeguard Measures on Imports of Footwear, WT/DS 121/AB/R, adopted 12 January 2000, ¶88 (holding that "the Panel failed to give meaning and legal effect to all the relevant terms of the WTO Agreement");
45. Appellate Body Report, United States - Section 211 Omnibus Appropriations Act, WT/DS176/AB/R, adopted 1 February 2002, ¶161, 338;
46. Panel Report on EC - Trade Description on Sardines, WT/DS231/R, adopted 23 October 2002, §7.76 (stating the principle of effectiveness is "a corollary of the general rule of interpretation in the Vienna Convention");
47. Appellate Body Report, United States - Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January 2003, ¶271 (stating that the interpretative principle of effectiveness should guide the interpretation of the WTO Agreement).
48. Appellate Body Report, United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted on 20 May 1996, section IV.
49. Although the principle of effectiveness is a fundamental principle of interpretation, it should be treated with some caution. See Michael Lennard, "Navigating by the Stars: Interpreting the WTO Agreements," Journal of International Economic Law, Vol. 5, No. 1 (2002), pp. 59-60.
50. China's WTO banking commitment relating to mode three is: "Except for geographic restrictions and client limitations on local currency business (listed in the market access column), foreign financial institutions may do business, without restrictions or need for case-by-case approval, with foreign invested enterprises, non-Chinese natural persons, Chinese natural persons and Chinese enterprises. Otherwise, none."
51. The horizontal commitment with respect to mode four states: "Unbound except for the measures concerning the entry and temporary stay of natural persons who fall into the categories referred to in the market access column." WT/ACC/CHN/49/Add.2.
52. There are four wholly state-owned commercial banks in China: (1) Industrial and Commercial Bank of China (Zhongguo Gongshang Yinhang); (2) Agricultural Bank of China (Zhongguo Nongye Yinhang); (3) Bank of China (Zhongguo Yinhang); (4) China Construction Bank (Zhongguo Jianshe Yinhang).
53. By the end of October 2005, there were thirteen joint-stock commercial banks, including Bank of Communications (Jiaotong Yinhang), CITIC Industrial Bank (Zhongxin Shiye Yinhang), China Everbright Bank (Zhongguo Guangda Yinhang), Huaxia Bank (Huaxia Yinhang), Guangdong Development Bank (Guangdong Fazhan Yinhang), Shenzhen Development Bank (Shenzhen Fazhan Yinhang), China Merchants Bank (Zhaoshang Yinhang), Shanghai Pudong Development Bank (Shanghai Pudong Fazhan Yinhang), Industrial Bank Co. Ltd. (Xingye Yinhang), China Minsheng Banking Corp. Ltd. (Zhongguo Minsheng Yinhang), Evergrowing Bank (Hengfeng Yinhang), China Zheshang Bank (Zheshang Yinhang), and Bohai Bank (Bohai Yinhang).
54. CEPA, Art. 13(1).
55. CEPA, Art. 13(2).
56. CEPA, Art. 13(3).
57. CEPA, Art. 13(5).
58. CEPA, Art. 13(4).
59. The HKSAR Basic Law provides that the Government of the HKSAR should provide an appropriate environment for the maintenance of the status of Hong Kong as an international financial centre. See the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China, 4 April 1990 (entered into force 1 July 1997), Art. 109, available at http://www.info.gov.hk/basic_law/fulltext/.
60. See CBRC news release on 30 December 2004, http://www.cbrc.gov.cn/ chinese/module/infomore.jsp.
61. Ibid.
62. Ibid.
63. Ibid.
64. Wang (Note 14).
65. As to the question of domestic application of international agreements, see John H. Jackson, "United States," in The Effect of Treaties in Domestic Law, edited by Francis G. Jacobs and Shelley Roberts (Sweet & Maxwell, 1987), pp. 141-69.
66. The State Council Notice, Guobanfa, No. 95 (2 December 2003).
67. Ibid., ¶2(2).
68. The PRC Legislation Law, passed by the Third Session of the Ninth NPC on 15 March 2000, effective as from 1 July 2000, available in Falü huibian 2000 (Law Compendium 2000) (Beijing: Renmin chubanshe, 2001), pp. 2-23.
69. Ibid., Art. 56.
70. See GATS, Art. 1, ¶1 and ¶3(a).
71. See the Decision on Revising the Administrative Rules on Representative Offices Established in the Mainland by Law Firms from the HKSAR and Macao SAR, issued by the Ministry of Justice of the PRC on 30 November 2003 and which came into force on 1 January 2004, Sifabu Order No. 84.
72. For example, the Ministry of Information Industry issued the Proclamation on Relevant Issues of Implementation of the CEPA (30 September 2003);
73. The Customs General Administration issued the Rules on Implementation of the Rules of Origin for Trade in Goods under the CEPA with Hong Kong (30 December 2003), Haiguanzongshu Order No. 106 (2003), http://www.customs.gov.cn/FLFG/FLFG.asp;
74. The State Administration for Industry and Commerce issued the Relevant Opinions on Implementation of the CEPA with Hong Kong and the CEPA with Macao and to Facilitate Mutual Economic Development between the Mainland, Hong Kong and Macao, Gongshangwaiqizi, No. 149 (30 December 2003).
75. The CBRC news release on 30 December 2004, http://www.cbrc.gov.cn/ chinese/module/infomore.jsp.
76. Yinjiantong (2003) No. 22.
77. Ibid., para. 1.
78. Ibid., para. 2.
79. Ibid., para. 3.
80. Paragraph 67 of the Working Party Report states: "The WTO Agreements would be implemented by China in an effective and uniform manner through revising its existing domestic laws and enacting new ones fully in compliance with the WTO Agreement."
81. One of the principles of the CEPA is to be consistent with the WTO rules. See CEPA, Art. 2.
82. See MOFCOM Notice on Law-Based Administration to Do Foreign-funded Enterprise Examination Work (Shangwubu Guanyu Yifa Xingzheng Zhuohao Waishang Touzi Qiye Shenpi Gongzuo de Tongzhi), paragraph 6, issued by the MOFCOM on 21 January 2005, Shangzihan (2005) No. 3, available at http://search.mofcom.gov.cn/china/getDetail.jsp?site_id= www&articleid=20050300022107&p_keyword=CEPA&old_key=CEPA.
83. FFFI Regulation 2001, State Council Decree 340, promulgated on 20 December 2001, effective 1 February 2002, available in Guowuyuan gongbao (Gazette of the State Council), No. 3 (2002), pp. 18-22.
84. Ibid., Art. 50.
85. Ibid., Arts. 6(3), 8(3).
86. Ibid., Art. 7(2).
87. Ibid., Art. 20(1)(2).
88. Ibid., Art. 8(2).
89. DRI 2002, issued by China's former banking regulator, the People's Bank of China (PBC) on 29 January 2002, effective 1 February 2002, void on 1 September 2004, PBC Decree, No. 1 (2002), available in Guowuyuan gongbao, No. 35 (2002), pp. 37-45.
90. Ibid., Art. 38.
91. See Specific Commitments on Opening Service Trade Area, Table 1 of Annex 4 of the CEPA (Note 28).
92. DRI 2004, issued by the China Banking Regulatory Commission on 26 July 2004, effective 1 September 2004, CBRC Decree, No. 4 (2004), Arts. 6, 7, available in Guowuyuan gongbao, No. 7 (Bound Vols. 7-12, 2004), pp. 1-20.
93. Ibid., Art. 40.
94. Public Notice of the CBRC on Further Opening up China's Banking Industry, ¶2 (24 November 2004), http://www.banksupervision.net/ list.asp?unid=5766.
95. The FFFI Regulation 2001 (Note 69), Art. 17.
96. The Public Notice of the CBRC on Permitting Mainland Branches of Hong Kong and Macao Banks to Engage in Insurance Agency Business (1 November 2004), http://www.cbrc.gov.cn/English/con_main/main1.jsp#.
97. See Public Notice of the CBRC on Further Opening up China's Banking Industry (Note 80), ¶5.
98. Ibid.
99. PRC Legislation Law (Note 56), Art. 79.
100. State Council Notice on Implementation of the PRC Legislation Law, 8 June 2000, Guofa (2000), No. 11, http://www.chinaiprlaw.com/flfg/ flfg58.htm.
101. Ibid., Section 2.
102. Decision on the Amendment of the Law on Commercial Banks, passed at the Sixth Meeting of the Standing Committee of the Tenth NPC on 27 December 2003.
103. See Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui gongbao (Gazette of the Standing Committee of the NPC, No. 1 (2004), pp. 32-35.
104. For the whole body of Commercial Banking Law 2003, see Gazette of the Standing Committee of the NPC, No. 1 (2004), pp. 36-44.
105. Banking Supervision Law 2003 was passed at the Sixth Meeting of the Standing Committee of the Tenth NPC on 27 December 2003 and took effect from 1 February 2004. See Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui gongbao, No. 1 (2004), pp. 4-9.
106. HKSAR Basic Law (Note 47), preamble.
107. According to paragraph 2 of Article 18 of the HKSAR Basic Law, China's national laws (quanguoxing falü) shall not be applied to the HKSAR except for those listed in Annex III of the HKSAR Basic Law. There are six laws listed in Annex III of the HKSAR Basic Law, including the Resolution on the Capital, Calendar, National Anthem and National Flag, Resolution on the National Day of the PRC, Nationality Law of the PRC and so on.
108. The CEPA took effect immediately after signature without ratification or review by the NPC, see CEPA (Note 5), Art. 23.
109. The Protocol on Accession of the People's Republic of China, WT/L/432 (23 November 2001), available in Compilation of the Legal Instruments on China's Accession to the World Trade Organization (Beijing: Law Press China, 2002), pp. 1-14.
110. See Wang (Note 14).
111. Measures of the CBRC for Implementing Administrative Licensing Matters of Foreign-funded Financial Institutions issued on 12 January 2006, effective from 1 February 2006, CBRC Decree (2006) No. 4, available in Zhongguo yinhangye jianguan guizhang huibian (Compendium of China Banking Regulations) (Beijing: Falü chubanshe, 2006), pp. 309-50.
112. Ibid., Arts. 8(4), 28(2).
113. Ibid., Art. 85(2).
114. See PRC Legislation Law (Note 56), Art. 79