The successful launch of the Shanghai-Hong Kong Stock Connect allows investors on the mainland and in Hong Kong to trade a range of stocks listed on the other side’s exchange. It is an important step in China’s financial reform and a great example of the "interconnection initiative".

During the first day's trading on Nov. 17 2014, transactions progressed steadily. For the Northbound link, the daily aggregate cap of 13 billion yuan was exhausted by 2 p.m.

As an important institutional innovation, the stock connect required a complete top-level design, and at the same time had to be based on actual market need. The successful launch reflects the central government's determination to maintain the long-term prosperity and stability of Hong Kong.

Investors from the mainland and Hong Kong are all eager to invest in the other side, which is the basis of the stock connect. The stock connect will not only offer convenience to investors, but also change the structure of the investors, transaction system, and corporate governance level of listed companies in the A share market of the mainland.

The stock connect is also part of the reforms on capital account convertibility and the internationalization of the renminbi. Using renminbi to trade and settle accounts will effectively improve cross-border capital flows and the convertibility of financial trade.

The Beijing APEC meetings have further developed the concept of interconnection. The Shanghai-Hong Kong Stock Connect is just the beginning of interconnection in the financial sector. The smooth development of the stock connect needs close cooperation between supervision departments and exchanges on both sides. With their combined efforts, the stock connect can become a highway towards the prosperity of the capital market. 

The article is edited and translated from《读懂沪港通的“互联互通”深意》, source: People's Daily, author: Jia Zhuang.