A senior official from the China Securities Regulatory Commission (CSRC) has signalled that further opening of Chinese capital markets will remain one of its key policy themes in 2018.
Speaking at the 15th Shanghai Derivatives Market Forum on 29 May, vice-chair of CSRC Fang Xinghai (方星海) said that “looking at all areas including products, investors, intermediaries and capital flows, we can say that we are already seeing the start of a comprehensively open Chinese capital market.”
Fang’s remarks arrive just after China committed to further opening of its futures markets to foreign investors, with the launch of an “internationalised” iron ore contract in early May and a crude oil futures contract in March, as part of efforts to increase Chinese influence over key commodity imports.
Another key landmark for China’s capital markets is on track to take place next week, with the formal incorporation of 234 Chinese A-shares into the MSCI Emerging Markets Index, which is expected to further whet the appetites of overseas investors.
Last month China also lifted restrictions on foreign ownership of key financial institutions, including securities companies, funds companies and futures companies, allowing overseas parties to obtain controlling stakes.
The move has prompted a slew of leading international financial institutions to unveil plans to enter the Chinese market, including JPMorgan Chase, Nomura and UBS.
“This opening will enable international investment banks to employ a vertical management model, and incorporate their Chinese operations into unified management of global operations,” said Fang.
A raft of other opening measures for China’s capital markets are lined up for the second half of 2018, including the completion of the first trials for the conversion of Chinese H-shares, the use of Chinese Depository Receipts (CDR’s) to bring overseas listed “red-chip” tech companies back to domestic bourses, and the launch of the Shanghai-London trading link.
“At present, international institutional investors are still widely under-allocated when it comes to Chinese assets,” said Fang. “Following the continuous rise in the status of the Chinese economy and the international importance of the renminbi, in the near-future increases in foreign capital inflows will become a normal affair.”
Fang also spoke on plans to further increase cooperation with Hong Kong regulators, and the need to better understand and cooperate with the regulatory systems of foreign jurisdictions.
“Given the increasing integration of Hong Kong and mainland capital markets, we have established a mechanism for bi-annual high-level meetings with the Hong Kong securities regulator,” said Fang.
“We have already convened meetings on three occasions, and reached, broad, common consensus on H-share regulation, Shanghai, Shenzhen and Hong Kong connect operations; accounting and auditing regulation for listed concerns, regulation of futures and derivatives, and striking against market manipulation.
“Following the expansion of the comprehensive opening of China’s capital markets, the missions of assessing international risk and strengthening international regulatory cooperation are becoming increasingly burdensome.
“We need to accelerate the training and recruitment of even more specialist regulatory personnel who understand both domestic and international business.”