Shanghai-London Stock Connect (沪伦通)

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    Shanghai-London Stock Connect (沪伦通) is an initiative for connecting the Shanghai Stock Exchange (SSE) and the London Stock Exchange (LSE) which was first mooted in 2015 and came into operation in 2019.

    According to a report from Bloomberg the initiative will not serve as a trading link given disparities in time zones and exchange regulations.

    SLSC will instead give Chinese companies the ability to raise capital via the LSE, while also enabling London-listed companies to issue shares in China.

    This will dramatically expand the investment opportunities of Chinese traders and fund managers by giving them greater access to international companies listed in the UK.

    In September 2018 Huatai Securities unveiled plans to become the first Chinese company to raise funds via SLSC via the floatation of up to 825 million global depository receipts (GDR) with a target of USD$500 million in financing, according to a report from SCMP.

    Regulations

    SLSC is restricted to companies with a market value of at least 20 billion yuan.

    UK companies must be listed for at least three years, while issuances of new stock by Chinese companies will be limited to 15% of their share capital.

    History

    On 29 December 2015 Shanghai vice-mayor Tu Guangshao (屠光绍) announced at press conference  on financial reforms to China’s free trade zone that the Shanghai municipal government was working with the China Securities Regulatory Commission (CSRC) on research into the SLSC.

    In September 2016 CSRC chair Liu Shiyu (刘士余) said that Shanghai was accelerating research into the SLSC, which would hasten the internationalisation of China’s capital markets.

    In November 2016 UK Chancellor of the Exchequer Philip Hammond announced that plans for the SLSC would entered a subsequent stage of development, forming part of long-term strategic cooperation between China and UK in the area of financial services.

    On 31 August 2018 CSRC issued the draft version of the “Chinese Depository Receipt Operating Regulations for the Shanghai Stock Exchange and London Stock Exchange Connect” (上海交易所和伦敦交易所市场互联互通存托凭证业务规定) for the solicitation of public opinions.

    CSRC also announced that SLSC was scheduled to officially launched before the end of 2018.

    On 12 October 2018 CSRC issued the “Supervisory and Regulatory Provisions Concerning Chinese Depository Receipt Operations of the Shanghai Stock Exchange and London Stock Exchange Connect (Provisional)” (关于上海证券交易所与伦敦证券交易所互联互通存托凭证业务的监管规定(试行), which came into effect immediately.