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China has drafted detailed plans to attract qualified foreign institutional investors (QFII) in one of a series of bold new steps to open up its stock market, the securities watchdog revealed yesterday.
The scheme, proposed by securities experts at home and abroad, is undergoing final examination by the securities authorities and is expected to be launched at an appropriate time, a senior official with the China Securities Regulatory Commission (CSRC) told China Daily yesterday.
The commission has invited foreign institutions to give their opinions. Advice from academics and industrial experts has also been sought to ensure the scheme complies with the practicalities of the situation in China, the official said.
Although he declined to say when the rules would be finalized and details announced, positive signs have emerged that the process will move faster, especially in the wake of CSRC Chairman Zhou Xiaochuan's recent remarks.
Zhou said in Shanghai that China had studied the QFII plan for several years. When it takes effect, foreign investors may get the green light to acquire equity interest in China's capital market or even take over domestic-listed firms.
Consensus has been reached in many aspects, he said, though co-ordination among different departments as well as amendments of existing rules are needed.
The QFII scheme is expected to allow qualified foreign institutions to set up special accounts at designated banks in China, through which they can receive foreign currencies and convert them to Renminbi to invest in the local stock market, according to experts participating in drafting the rules.
They would be able to invest in the A-share market, which is now open only to Chinese investors.
Foreign companies should also be allowed to take over or acquire stakes of domestic-listed firms through the secondary market, said an official with CSRC's Shanghai office.
But domestic-listed companies would have to improve their quality to make themselves attractive to foreign investors once the market is open.
China has also mulled allowing foreign companies to issue A shares, which would help them collect funds in Renminbi, he said.
While letting foreign investors in, the central government is also considering how to allow more domestic investors to go out and invest in overseas capital markets such as Hong Kong.
It will be another balancing process and involves a lot of co-ordination, the official said.
The entry of qualified foreign institutional investors would help improve the overall investment rationale in the domestic bourses, said Hu Ruyin, director of the Research Center of the Shanghai Stock Exchange.
However, they would have to meet the threshold set by the Chinese Government in terms of asset scale and other qualifications, and there may be special requirements of when they could remit out the capital, Hu told China Daily.
Apart from foreign-funded companies in China and mainland-background Hong Kong-listed firms, the government should also encourage blue-chips in foreign capital markets to seek a public listing in China.
Only then will China's stock market become a really international-standard market, he said.
(China Daily Hong Kong Edition June 12, 2002)
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