Tu Guangshao, secretary-general of the China Securities Regulatory Commission (CSRC) said last week that the government is considering allowing foreign institutional investors to purchase Chinese-listed A share stocks on a limited basis.

Foreign-funded enterprises, so far shut out of China's securities market, may also be allowed to list their stocks on domestic bourses, he said.

Tu is the latest but certainly not the first senior official to indicate a limited opening of the capital market, on the eve of the China's expected accession to the World Trade Organization (WTO).

Early this year, senior government officials in charge of financial affairs clearly expressed support for the above-mentioned measures.

Other choices on the list are encouraging overseas listings by domestic enterprises, setting up Sino-foreign joint industrial and venture capital funds as well as joint venture fund management companies, and introducing foreign stakes in enterprises in competitive sectors.

Analysts pointed out that China has postponed its plan to open its capital market after the Asian financial crisis. However, the expected WTO accession and the economy's internal demand for foreign investment may have forced the government to open its capital market on an experimental and limited basis.

Foreign investment has been a major factor behind China's high economic growth in the last two decades and will remain so in the foreseeable future.

However, it is noted that foreign investment in China dropped 12.8 percent in 1999, the first negative increase in two decades.

Economists attributed the slide to new changes in international capital flow and said China needs to adjust its policies.

In a global economy, acquisition and merging has been the major form of direct foreign investment. So far, such form of investment is not encouraged in China.

Many economic sectors in China, especially the service sector, including banking and insurance services, are still closed to foreign investors.

(Xinhua)