China Mulls More Ways for Foreigners to Invest in Its Capital Market

What’s new: China will consider creating more channels for overseas investors to participate in the Chinese mainland’s capital market, China Securities Regulatory Commission (CSRC) Vice Chairman Fang Xinghai said at a financial summit in Shanghai on Saturday.

Currently, overseas investors have several ways to invest in the mainland market, including stock connect programs linking Hong Kong and the mainland, as well as the Qualified Foreign Institutional Investor program and its sibling, the Renminbi Qualified Foreign Institutional Investor program.

Allowing more mature overseas institutional investors access to the mainland’s capital market is an efficient way for it to grow in a fast and stable manner, he said.

Fang also said that China will improve the mechanism for overseas companies to issue Chinese depositary receipts (CDRs) and file for secondary listings on the mainland, in a bid to introduce more quality listed firms. CDRs are a new type of equity security created in 2018 to allow red-chip companies — overseas-incorporated companies whose main business operations are on the mainland — to list in Shanghai or Shenzhen.

What’s the background: China has been making efforts to open up its financial market to overseas investors and at the same time lure mainland businesses listed abroad to list back home.

Earlier this year, the CSRC lowered the market-value threshold for eligible red-chip companies to list CDRs on the mainland.

What else did he say: It’s also essential to give foreign firms easier access to the country’s securities and fund sectors, Fang said. Currently, China has approved eight foreign-controlled securities firms, the first wholly foreign-owned mutual fund manager and the first wholly foreign-owned futures firm.

Fang said the regulator will “further improve and foster an environment with fair competition for domestic and foreign securities and fund institutions,” and boost their cross-border services capabilities to better fulfill companies’ needs for cross-border investment and financing.

In addition, Fang said that the CSRC will further international regulatory cooperation, including tackling the auditing issues of Chinese companies listed abroad, to protect investor rights and fight against financial fraud.

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Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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