Financial liberalization crucial step in opening-up

By Hu Weijia Source:Global Times Published: 2019/1/13 20:53:39

File photo: VCG

As China pledges to further open its economy to foreign companies and investment, the financial market is expected to be a top priority.

In 2019, foreign inflows into China's stock market are expected to double year-on-year to 600 billion yuan ($88.7 billion), Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), was quoted as saying recently.

Stock indexes on the Chinese mainland were among the world's worst-performing major equity markets last year, with the benchmark Shanghai Composite index slumping almost 25 percent. Trade tensions with the US are complicating China's efforts to shore up its stock market. If the government wants to build confidence in the domestic A-share market and win the attention from international financial institutions, strong measures may be needed.

Fang's words suggested the CSRC is mulling about how to attract more foreign investors. In 2017, the country announced plans to raise the foreign ownership limit to 51 percent in Chinese securities firms, fund managers and futures companies. 

Now, China may take bigger steps in the coming years to persuade more foreign investors to put long-term investment into Chinese stock markets.

Will China allow 100 percent foreign ownership of brokerages? The answer is yes, and we need to make it as soon as possible. China has unveiled plans to allow foreign carmakers to set up wholly owned subsidiaries, and the brokerage business should be the next area for removal of the limit on foreign ownership. 

If China allows 100 percent foreign ownership of domestic securities firms, it will have a greater impact on the economy than the move involving foreign carmakers.

With trade woes increasingly weighing on mainland stock markets, it would be quite helpful if China could further open its financial sector to improve competitiveness. Apart from the steps China has already taken, the country needs to draw up more policies to allow professional foreign investors to enter the A-share market.

A risk-based system to monitor financial markets, appropriate management mechanisms and proper policy tools are necessary to maintain financial stability as China moves forward to liberalize its stock markets. This poses a tough challenge for the Chinese economy, but it will mark a major step in China's opening up process.

The author is a reporter with the Global Times.


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