Chinese regulators are seeking approval for new rules to let local investors buy foreign shares, a Hong Kong newspaper said, part of plans to also give foreign fund managers greater access to a US$515 billion stock market.
The China Securities Regulators Commission sent its proposal to Cabinet for approval, the Oriental Daily News said, citing unidentified people. Similar to rules in Taiwan, they would create qualified foreign investors, or QFII, who could buy Chinese shares. Similarly, qualified domestic investors, or QDII, could buy Hong Kong-listed China stocks.
Zhou Xuan, a spokeswoman for the China Securities Regulatory Commission, confirmed that the matter is under discussion. She declined to say whether the plans were submitted to the Cabinet.
China bans its citizens from buying stocks abroad to prevent an exodus of foreign reserves, used to maintain the currency's fixed rate to the US dollar. As a WTO member, however, China is trying to bring its securities markets into line with global standards. It also wants to provide more outlets for the US$940 billion held by Chinese as personal savings.
The revamp now under consideration would represent the biggest reforms since regulators said in mid-February 2001 that local investors could more easily buy foreign-currency shares traded in Shanghai and Shenzhen. That shift sent stock indexes surging by their 10 percent limit for three straight days.
Two indexes that track Chinese hard currency shares lost more than a tenth of their value this year. Gains of more than 90 percent last year made them the world's best-performing indexes.
The new rules are more likely to bring more Chinese investors to Hong Kong, boosting the market, than they are to lure foreign investors to China, where stocks trade at an average of 42 times earnings, more than double 17 times for the Hang Seng Index. The plan was also mentioned in Beijing this month by Dai Xianglong, governor of the People's Bank of China.
"Politically, it gives rise to the question of why China is formulating policies to support the Hong Kong market," said KK Kwan, who helps manage US$28 million at SIIC Asset Management Co.