The container dock of Yangshan Port in Shanghai, east China, March 18, 2020. The international container port saw an increasing flow of cargo ships during the past two weeks. (Photo: Xinhua)
China‘s capital market has become the most attractive in the world in an environment of low and negative interests rates, and the level of foreign investment through the two inbound schemes had reached a six-year high in the first seven months, a Chinese official said on Saturday.
The comment comes after Chinese regulators announced rules on Friday to combine two major inbound investment schemes, and expand the investment scope for foreign investors, a move which observers said represents an important step in the country‘s efforts to continue opening up its capital market to foreign investors amid global low interest rates and strained China-US relations.
Qiu Yong, an official at the China Securities Regulatory Commission, made the comment at a forum on Saturday. He said that the opening-up of China‘s capital market has not been swayed by the COVID-19 pandemic, but follows the country‘s plan to gradually open up.
According to the rules published by the country‘s central bank, securities regulators and foreign exchange regulators on Friday, starting November 1, the Qualified Foreign Institutional Investor (QFII) scheme and Renminbi Qualified Foreign Institutional Investor (RQFII) will be combined,
The new rules will reduce the barriers for foreign capital access to the Chinese market.
China launched the QFII scheme in 2002 and RQFII program in 2011, through which foreign institutional investors are allowed to trade in China‘s stock and bonds market. The draft rules of the new policy were published in January 2019.
According to the new rules, the scope under the two schemes will be further expanded. Foreign investors will also be allowed to invest in securities listed on China‘s New Third Board, private investment funds, financial futures and commodity futures.
They can also participate in bond repurchases and securities margin trading.
Analysts said the move will accelerate the inflow of foreign capital to China, as the new rules will ensure that cross-border capital flow becomes more efficient and convenient, and as global investors hunt for a market where yield on investment could be relatively high.
The revisions also carry a “special weight” amid Washington‘s push for a financial decoupling with Beijing, analysts said.
“It also sends a clear signal to the world on China‘s firm stance to further open up its financial market. Such opening-up is conducted in a gradual and flexible manner to control risks,” Liu Xuezhi, an economist at Bank of Communications, told the Global Times on Saturday.
On Thursday, FTSE Russell said it will add Chinese government bonds to its flagship World Government Bond Index starting October next year. It would mark the third time that China‘s government bonds have been included in a major bond index.
The central bank and foreign exchange regulators are now studying the key content and procedures on a financial opening-up in the next five year, Lu Lei, deputy administrator of the State Administration of Foreign Exchange, said at a forum on Saturday.