Shanghai to introduce new reforms in capital markets

15:44, May 04, 2010      

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Shanghai is currently considering reform in aspects of capital account convertibility, including introducing a qualified foreign limited partner (QFLP) system to allow foreign RMB funding to invest in domestic capital markets, reported today's Shanghai Security News.

Fang Xinghai, director of Shanghai Municipal Financial Services Office said on April 30 that Shanghai will become one of the world's three major financial markets in terms of scale in the next decade. However, it lacks maturity and openness to foreign capital, he said.

"We are now actively preparing for foreign companies to list on the Shanghai stock market. Some rules must be amended and are expected to be ready before the end of the year in order to meet new challenges for the domestic market." Fang said.

However, Fang is reluctant to give a timetable for launching the international board. Fang also emphasized that the international board will attract world-class companies to list in the market. The majority of companies that are first to be listed, however, should be those that are well known to Chinese investors. A rapid regression is expected for red-chip enterprises on the Chinese mainland.

Fang said Shanghai's cross-border RMB trade settlement, exceeding 10 billion RMB, is increasingly expanding. With China's RMB reform to deepen cross-border trade settlement as well as the increasing expectation of RMB appreciation, the size of foreign institutions and individuals holding RMB is enlarging.

Overseas RMB use is relatively limited to only a few outlets. By and large, it only used for a limited number of fixed-profit banking products in Hong Kong. Shanghai now is considering launching overseas RMB investment in China, such as bonds investment, stocks and other inter-bank lending businesses to partly solve this problem.

By People's Daily Online


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