China will combine two large foreign-investor programs and open up more of its financial markets to outside institutions, relaxing several rules as it encourages a rising global profile for its currency.
The China Securities Regulatory Commission, the State Administration of Foreign Exchange and the People’s Bank of China on Friday finalized changes that will combine the qualified foreign institutional investors program and its yuan-denominated counterpart under a single regime with expanded eligibility.
The programs were created in the last two decades to allow licensed non-Chinese financial institutions to invest in the previously cloistered Chinese capital markets.
The new rules will ease qualifications and streamline the application process for the combined program, the securities regulator said. The licensed institutions will have more access to Chinese financial markets, including the ability to invest in futures, options and other additional asset types as well as participate in bond repurchasing and margin trading.
The upcoming changes will also enhance a range of supervision and regulatory enforcement, the China Securities Regulatory Commission said.
The final rules, first published as drafts in January 2019, will come into effect on Nov. 1.
The securities regulator said that during a period for public comment, participants in China’s markets expressed “universal support” for the new measures’ main thrusts and recommended a quick implementation to “promote market internationalization and balance the development of existent channels for foreign investment.”
The regulator said, “Going forward, the CSRC will stay committed to market liberalization and accelerate the two-way opening-up of Chinese domestic capital markets at a higher level.”
The new rules are the latest in a string of loosening restrictions for China’s once-isolated financial markets. In July 2019, the China Securities Regulatory Commission encouraged foreign involvement in wealth management, insurance and other industries, and a couple of months later the State Administration of Foreign Exchange eliminated long-standing quotas for the Qualified Foreign Institutional Investor programs.
Opening up capital markets is one part of China’s ongoing efforts to liberalize its financial systems and internationalize its currency, the renminbi. Involving foreign banks and companies in its markets brings in capital and creates a greater reliance on the Chinese currency, according to an article by Cornell University’s Emerging Markets Institute.