BEIJING, Aug. 23 (Xinhua) -- The Shanghai-London Stock Connect program has again drawn the market's attention, recently.
Yi Gang, Governor of the People's Bank of China (PBOC), earlier announced at the Boao Forum for Asia (BFA) Annual Conference 2018 that Shanghai will endeavor to launch the program by the end of this year.
It is learned that China Securities Regulatory Commission (CSRC) and Shanghai Stock Exchange (SSE) are busy preparing for the launch as scheduled.
So far, relevant institutional arrangement has been made for the program, and concrete measures are being taken. The launch of the Shanghai-London Stock Connect program has far-reaching significance as it will link up the markets of Shanghai and London.
Unswervingly expanding opening-up
The Shanghai-London Stock Connect is another important measure for China's capital market to open wider to the outside world following the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect. It manifests China's determination and confidence in expanding opening-up.
According to some insiders, the program will make A-shares more international and help China align its information disclosure system of listed companies with international standards, thus improving and standardizing the fundamental institutional system and regulatory system of China's capital market. Besides, it provides more diversified choices for domestic investors, allowing them to invest in stocks listed on the London Stock Exchange and benefit from global economic growth.
China has made remarkable progress in opening up its capital market this year.
Crude oil futures, China's first futures open to foreign investors listed on the Shanghai Futures Exchange on March 26, have seen a steady growth in trading volume and positions, and have given initial play to its functions. At the same time, the Dalian Commodity Exchange has introduced foreign trade for iron ore futures, accumulating valuable experience for the internationalization of the existing futures. China is steadily promoting the internationalization of more futures.
In order to better open up the capital market, the PBOC and the State Administration of Foreign Exchange (SAFE) have released new measures to adjust current foreign exchange management policies for qualified foreign institutional investors (QFIIs) and RMB qualified foreign institutional investors (RQFIIs). China will unleash the constraints on the outward remittance ratio and the principal lock-up period and allow QFIIs and RQFIIs to hedge their foreign exchange exposures for their investments in China. According to some insiders, this thorough reform in policies for the QFIIs and RQFIIs has lifted most of the restrictions while the quota ceiling of prudential macro management is maintained. Meanwhile, foreign investors are allowed to hedge their foreign exchange exposures so that more institutions can participate in developing the foreign exchange market. In addition, an increased experimental ceiling of 5 billion US dollars is implemented for qualified domestic limited partners (QDLPs) and qualified domestic investment enterprises (QDIEs) in Shanghai and Shenzhen. The introduction of these measures will facilitate further investment of foreign investors in Chinese markets.
Up to now, 13 foreign asset management companies have been licensed as private fund managers, including BlackRock, the world's largest fund company, and Bridgewater, the world's biggest hedge fund. It is reported that BlackRock has launched a private equity fund at the end of this July.
Tan Yaling, president of the China Forex Investment Research Institute (CFIRI), believed that the further opening of the capital market has demonstrated China's financial strength and confidence. Moreover, the pace and scope of the opening of the capital market are accelerating, which have promoted the globalization of Chinese enterprises.
In terms of products, investors, intermediaries, capital flows and other aspects, it can be said that a fully open Chinese capital market has taken shape, noted Fang Xinghai, Vice Chairman of China Securities Regulatory Commission (CSRC).
Promoting opening-up while preventing risks
Further opening of the financial market is a strategic choice based on the development demands of China. For the improvement of international competitiveness of the financial sector, the further opening of the market will help introduce more advanced business ideas, management methods, and diversified investors.
The further opening of China's capital market will not only enhance the influence of foreign capital on A shares, but also present new requirements for market supervision.
In particular, risk management is a perennial subject in the process of opening. It means that, on one hand, the steps to open up the capital market should be sound; on the other hand, the risks have to be controlled so that we can always take the initiative to prevent and mitigate such risks.
Just as Yi Gang said, this new round of financial opening measures has been implemented amid ready conditions when regulations and data are put in place. Fundamentally, China's financial opening up has followed the principle of independence, gradual advancement and controllability.
China is one of the countries with the highest savings rates, and global allocation of assets is imperative for the country’s economic development. It is also an irresistible trend for Chinese enterprises to continuously increase investment in foreign countries. Therefore, the opening up of China's financial market also means Chinese financial enterprises and institutions should accelerate their steps to go global so as to catch up with entity enterprises and actively respond to the Belt and Road Initiative. Presently, many trading agencies and financial institutions from the countries along the Belt and Road routes opened their arms to welcome the investments by Chinese stock exchanges and securities traders to jointly develop their local financial institutions and markets.
According to some experts, China's capital market should follow the future path of opening up for promoting reform and development, and improving the capability of financial institutions. By opening wider to the outside world, China's financial sector will become stronger and its capital market will be more developed.
Many insiders believed that China's capital market, with increasing depth and breadth, will definitely give birth to the Chinese companies and market institutions with high international competitiveness. (Edited by Yang Yifan, yangyifan@xinhua.org)
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