International asset managers and life insurers should benefit from China’s recent policy decision to allow foreign firms to take majority stakes in its domestic financial firms, says a new report from Moody’s Investors Services.

Overall, the move is credit positive for Chinese banks and other financial institutions, “because it will increase foreign investors’ involvement in domestic markets and improve financial firms’ risk management and corporate governance,” the report says.

The new policy will raise the foreign-ownership cap on firms such as securities dealers, fund managers, and futures firms to 51% from 49%, and it will remove the cap entirely after three years.

The policy will benefit international asset managers seeking to enter the Chinese market, the report says. It notes that the Asset Management Association of China has now approved the registration of three international firms: Invesco Ltd., Neuberger Berman Group LLC, and Value Partners Group Ltd.

“We expect more foreign firms to invest in majority-owned joint ventures and launch funds in China,” the rating agency says the report.

The new policy stance will benefit both foreign and domestic life insurers, as it will essentially allow foreign insurers to have majority- and wholly owned subsidiaries in China. Currently, there are 28 foreign insurers operating in China, Moody’s says, yet they have only a 6.4% market share.

“The opportunity to increase management control will enhance these companies’ growth and earnings,” the report says. “We expect that the increased foreign-insurer participation will promote the development of more sophisticated products with higher margins and more recurring premiums. These products include pensions, retirement planning and healthcare insurance, all areas currently underserved by domestic insurers. Additionally, the new regime will provide foreign insurers opportunities to leverage the expertise they have gained in developed markets.”

The policy change is part of China’s plan to open its financial sector, including banks, securities firms and asset managers, to foreign companies. “The new regime will promote the flow of foreign investment to Chinese financial institutions, improve their capital adequacy and buttress their risk-management capacities. This is in line with a key regulatory policy objective since January 2017 to strengthen the financial sector’s risk management,” the report says.