China vows wider access to financial markets amid trade row

China has said it will allow greater foreign access to its stock markets
AFP

Shanghai (AFP) – China said on Wednesday it would allow foreign investors greater access to its stock markets and promised that other previously announced financial reforms would come into effect within months in its latest conciliatory signals amid US trade tensions.

China’s securities regulator said foreign investors would be allowed to trade a greater volume of shares on Chinese stock markets through existing programmes linking Hong Kong’s bourse with mainland exchanges, and also will “strive” to establish a similar link between Shanghai and London this year.

Central Bank Governor Yi Gang also said China would move ahead with plans to remove limits on foreign shareholdings in Chinese financial institutions.

Foreign firms will be allowed to own as much as 51 percent of joint ventures in the securities, funds and futures industries, up from the current 49 percent, Yi told the Boao Forum for Asia in southern China.

All limits are to be removed in three years, the government had said previously.

Foreign ownership restrictions in Chinese banks and financial asset management firms also will be removed.

The foreign-ownership reforms were first announced in November during a state visit by US President Donald Trump, but the latest announcements appeared to set a firmer timetable for implementation, with Yi quoted saying they would commence “in the coming months”. 

The latest promises came a day after President Xi Jinping pledged at the same forum that China would lower car tariffs this year and take other steps to open the world’s number two economy “wider and wider”.

His comments addressed major US complaints in a simmering trade row that has seen both sides threaten retaliatory measures.

Both Yi and the China Securities Regulatory Commission said the allowable daily two-way trading volume between Hong Kong and mainland China’s two exchanges would each be increased fourfold to 94 billion yuan ($15 billion), effective May 1.

A Hong Kong-Shanghai trading connection was established in 2014, and a similar one between Hong Kong and China’s second exchange in Shenzhen two years later, giving foreigners greater access to Chinese stocks via Hong Kong, and vice versa.

A proposed London-Shanghai link was first disclosed in 2015 but no firm timetable had been set.

The US and European Union have long complained about market access in a host of industries, with foreign firms unable to take controlling stakes in Chinese firms.

In the tightly controlled banking sector, for example, overseas companies currently cannot hold more than 25 percent of a lender’s capital, making it difficult for them to play a major role in the domestic market.

Analysts have previously downplayed such reform promises, saying they are being made now that Chinese enterprises have a firm hold on domestic markets.

Trump, however, on Tuesday praised Xi’s “kind words” on reform and pledged to cooperate with China toward “great progress” in resolving trade differences.

Yi also said China would not devalue its currency as a weapon in a trade war, state television said.

.