China May Further Open Securities Market to Hong Kong Investors

China’s securities regulator said it will come up with policies to further open its securities industry as it continues developing the country’s capital markets.

The China Securities Regulatory Commission is now focusing on implementing previously announced measures allowing financial institutions from Hong Kong and Macau to enter China’s securities industry, the regulator said Friday on its microblog.

The Chinese government previously pledged to let financial institutions from Hong Kong and Macau set up securities joint ventures in Shanghai and Shenzhen, plus one in Guangdong province outside of Shenzhen. They can own as much as 51% of the joint ventures, with no more than one in each location, according to the microblog statement.

Loosening restrictions will allow overseas investors to compete more effectively in Asia’s largest equities market. Greater foreign participation may also help China develop its securities industry, more than a decade after Goldman Sachs Group Inc. set up a joint venture in Beijing.

Possible Changes

China has been considering sweeping changes to its securities industry that would allow foreign banks to control local joint ventures and broaden their offerings beyond stock and bond underwriting, people with knowledge of the matter said earlier this month. Overseas firms could ultimately be allowed to take full control of joint ventures, the people said.

China stepped up the opening of its capital markets after it was admitted to the World Trade Organization in December 2001. The government encouraged local brokerages to find overseas partners to help strengthen the industry.

Since then, China’s securities firms have surged in value as the country’s economic boom pushed stock markets higher and trading volumes soared. Foreign-backed joint ventures, restricted primarily to handling share sales and bond underwriting and trading, didn’t benefit to the same extent.

— With assistance by Yuling Yang

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