Regulators are accelerating the opening-up of China’s capital market by further relaxing the limits on foreign investment in the A-share market.
According to an announcement released on the official website of the China Securities Regulatory Commission on the night of Aug 15, foreign individuals working in China will be allowed to open A-share securities accounts. Meanwhile, all foreign employees working for A-share listed companies will be entitled to stock option incentive plans.
Previously, foreigners with permanent residency in China were allowed to open A-share accounts. Foreigners who had set up foreign-invested companies in China and made the companies public in the A-share market were allowed to set up A-share accounts and hold only their own companies’ shares. Foreign employees working for A-share listed companies were only allowed stock options if they worked in China.
The new regulations will take effect on Sept 15.
But it should be noted that not all individual investors will benefit from this new round of opening-up. Foreigners from countries and regions whose securities regulators have signed cooperation partnership with the CSRC will be included in the new regulations. So far, the CSRC has signed such agreements with 61 countries and regions, including the United Kingdom, Australia and Singapore.
Ma Tao, chief strategist at fund company BOCOM Schroders, said the new regulations will help with the internationalization of the A-share market and financial accounts. The new regulations will have a long-term and fundamental impact on the stock option incentives available to foreign professionals working in China or establishing their own businesses in the country.
Yang Delong, chief economist at Shenzhen-based First Seafront Fund, said that foreigners’ deepened participation in the A-share market will help attract more foreign financial talent, whose experiences in more developed markets will assist with the internationalization of China’s securities and futures industries.
“As foreigners are allowed to open A-share accounts, the Chinese market will be more attractive to foreign capital, which will become an important driving force for the nation’s economic growth,” he said.
Yuan Guangping, portfolio investment manager at Beijing-based private equity firm Starrock, said that as A-share investors become more diversified, market liquidity will be enhanced and the capital market’s structure will be further optimized.
As a result of the stock connect mechanism between Shanghai, Shenzhen and Hong Kong, overseas investors’ interest in the A-share market has increased. According to the CSRC, overseas investment in the A-share market reached 161.6 billion yuan ($23.4 billion) from January to July this year. The figure was 118.9 billion yuan during the same period in 2017, as calculated by GF Securities.
In April 2013, regulators gave the green light to individuals from Hong Kong, Macao and Taiwan working on the Chinese mainland to invest in the A-share market. There were 125,000 such investors in the A-share market by July, according to China Securities Depositary and Clearing Co Ltd.