China’s State Council, the country’s cabinet, said it will deepen reforms to improve the quality of and access to the nation’s stock, bond and commodities markets.
The government will relax limits on foreign investment in listed companies, expand the quotas for capital flow, and develop commodities trading tools, the State Council said in a statement posted on the central government’s website yesterday. Some of the measures had been announced earlier by regulators, and yesterday’s statement didn’t provide details.
Chinese President Xi Jinping is pushing changes that may be the most sweeping since Deng Xiaoping’s liberalization to loosen government controls in everything from energy pricing to banking. The government last month announced a plan to connect the stock exchanges of Hong Kong and Shanghai to promote trading volumes and the use of the yuan.
“Our country’s capital markets have developed very rapidly over the last 20 years, and we have nascent market systems to cover stocks, bonds and futures,” the State Council said in the statement. “Our nation’s capital markets are still immature and some organizational and systematic problems still exist.”
China’s policy makers are seeking to bolster its capital markets as its benchmark stock index underperform amid concern of an economic slowdown. The Shanghai Composite Index (SHCOMP) has declined 23 percent in the past five years, the worst performer among the world’s 10 largest stock markets. The MSCI All Country World Index of developed and emerging market stocks has climbed 72 percent in the same period.
The China Securities Regulatory Commission yesterday also unveiled more guidelines for the Shanghai-Hong Kong stock market access. A single overseas investor will be allowed to hold as much as 10 percent of a company listed in China, while overseas investors can together own as much as 30 percent of a firm, the regulator said.
Investors should use yuan to trade stocks during the trial, the CSRC said on its microblog, seeking public opinion.
As part of the reforms, China would set up a local government bond system, facilitate cross-border investment and fundraising, and steadily open its capital markets to foreign individuals, the council said, without giving details.
Regulators would intensify a crackdown on insider trading, look at improving delisting rules, encourage fair competition for investors to participate in mergers and acquisitions, and develop commodities trading tools such as options.
China will also study preferential tax policies and support investments by pension funds into capital markets, the council said.
The reforms will seek to “stimulate market activities, expand market depth, open the markets for mutual access,” the State Council said in the statement. The government also wants to improve investor protection for small investors, it said.
Policy makers in China last year ended an 18-year hiatus on trading of treasury bond futures, approved the trading of iron-ore futures, and announced plans to let more brokerages borrow stock for short selling. To boost transparency, the nation’s central bank has also tightened rules on interbank bond market trading.
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