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China's Equity Market Opening Inevitable: Economists
A group of senior economists Thursday said that China's domestic securities market opening is inevitable with the gradual liberalization of A share market to foreign investors even before the Renminbi becomes convertible in the capital account.
Ronld Yung, executive director and head of China Research of BNP Paribas Peregrine Securities Limited, told a press conference that China's equity market is undergoing tremendous transformation and the world is watching in earnest the opening of China's market.
After his years of research on China's market, Yung and his colleagues published a lengthy report on China's equity market, encompassing the macro economic perspective and providing an analytical study on over 400 listed Chinese companies.
BNP Paribas Peregrine's Chief Economist Xingdong Chen said, " the Chinese government targets at 7 percent of GDP growth in the next 10 years, but we forecast a 7.5 percent growth."
Based on this forecast, Chen believed China will be in an enormous capital demand, about 50 trillion yuan (about US$6 trillion), during the period from 2001 to 2010. To meet the demand, investment would be the growth driving force, for instance, the consumption of housing and passenger car all depends on investment, he said.
Chen said equity market can attract portfolio capital to provide an exit mechanism for foreign direct investment so as to remove foreign capital flow barrier. He suggested that it is necessary to introduce external pressure to promote stock market development and improve corporate governance and management skills.
Economists also believed that economic globalization would integrate China's financial market into international operation, and foreign investors would press China to open its market in order to share China's economic prospects. They also felt that China will have to gradually open its capital market in line with its WTO entry. Chen said China's equity market is facing many challenges. One of the major challenges is that the size of market is far from meeting demands both to listing companies and investors, he said.
Chen predicted that B share is to expand and the market opening will take accelerating pace after 2003.
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