China removed one more hurdle for foreign investment into its capital markets almost 20 years after it first allowed access.
Global funds no longer need approvals to purchase quotas to buy Chinese stocks and bonds, the state administration of foreign exchange said in a statement on Tuesday. It removed the $300 billion overall cap on overseas purchases of the assets, about two-thirds of which remain unused.
It’s the latest push by Chinese authorities to increase use of the yuan in international transactions, and comes as they seek out more foreign capital to balance payments. Scrapping the investment quota is also another step in policy makers’ efforts to open up China’s financial system to the world.
It’s unclear how much fresh investment the latest moves will attract into China’s $13 trillion bond and $6.9 trillion equity markets, given that foreign investors had only used $111 billion of the $300 billion quota available to them through Aug. 30. There are also alternate routes of investment, including trading links with Hong Kong Exchanges & Clearing Ltd., that allow offshore money managers to trade stocks and bonds in China via the former British colony.
“The move is more symbolic and won’t trigger significant capital inflows,” said Ding Shuang, chief China and North Asia economist at Standard Chartered Bank Ltd. “But it’s a good gesture for the officials to make, as the 70th anniversary of the People’s Republic of China’s founding is approaching”.
Frontpage September 5, 2019