China encourages foreign investment in stock market

July, 2012

foreign investments in stock markets in China could suffer a decisive impetus as the effect of a recent proposal by the supervisory authority. This initiative would increase the liquidity of domestic markets and the possibility of intervention of foreign actors in the Chinese economy.

Policies aimed at encouraging foreign investment in the Chinese economy pursue a lot. In particular, it is being evaluated the proposal from the China Securities Regulatory Commission (CSRC), which would like to see the lighter condition requirements that must be met by foreign institutions to invest in the stock markets of the country. At present, the scope afforded to foreign actors are distinguished according to the type of subject that organizes the operation: foreign natural persons do not have access to the Chinese stock market, while foreign institutions must first qualify as a qualified foreign investor .
“The Chinese authorities are clear that the sustenance of a stable growth over the medium term can only come from changes in the economic arrangements of the country.”

Wen Jabao

Chinese Premier

According to the proposal made by the authority deputy to the supervision and regulation of the stock market, the amount 'of assets necessary to obtain this qualification should be reduced from the current $ 5 billion to $ 500 million. The Commission also envisages to increase the share that foreign institutions may hold in Chinese listed companies, from the current 20% to 30%, as provided for access to the interbank bond market. This action marks a decisive step towards the country's increasing openness to international markets, vital to avoid dangerous situations of economic stagnation, following the same effects on the international economic crisis. The initiative, which follows other important measures adopted in the industrial and banking sectors, demonstrates, moreover, the process of deep financial innovation that is taking an increasingly significant way in the country, which seems to move towards greater financialization of its economy.