Foreigners in China to be allowed to open A-share stock accounts
July 10, 2018 Category China News Round-up, Weekly
China will allow foreign individuals working on the Chinese mainland to open yuan-denominated A-share accounts through local brokers, the China Securities Regulatory Commission (CSRC) said in a statement. Foreign employees with equity incentives working in A-share listed companies overseas will also be allowed to open a securities account to trade in A-shares, according to the CSRC, which is seeking public opinion until August 8 on the issue. The securities regulatory body of the countries of qualified foreigners should have already established a regulatory cooperation mechanism with the CSRC, according to the statement. So far, 62 countries and regions have cooperative MOUs with the CSRC, including Hong Kong, the U.S., UK, Singapore, Australia, and Japan.
The revision in the draft rules aims to further open the China’s capital market to foreign investors as well as attract talents from all over the world to enhance the international competitiveness of the CNY50 trillion A-share market. “The revision to the A-share securities account opening system is of great significance, will broaden the channels for capital inflow, optimize the market structure, and improve the openness and internationalization of the capital market,” the statement said. Current rules only allow foreigners with China green cards to open A-share securities accounts and only lets foreigners who work in the mainland as board directors, senior managers, core technical personnel and core business staff to enjoy equity incentives. Related tax and foreign exchange policies will also be released to support the rules, the Shanghai Daily and China Daily reports.
Hao Hong, Managing Director and head of research for Bocom International in Hong Kong, said it may be a gesture by China to show it is willing to continue widening foreign access to the financial market. “But the impact on the market may be limited given the number of eligible foreign investors and how many of them are actually willing to trade A-shares through local brokers,” Hong said.
The CSRC currently only allows selected foreign individual investors to open domestic brokerage accounts, such as those who have obtained permanent residency rights in China or foreign employees of listed A-share companies who currently live in China. Foreign individual investors are limited to buying A-shares through brokers in Hong Kong who must go through the Hong Kong stock exchange, which is linked to the Shanghai and Shenzhen stock exchanges. Foreign institutional investors who meet certain criteria can also access Shanghai or Shenzhen markets through the Qualified Foreign Institutional Investor (QFII) program.
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