Investors in city’s FTZ to get access to foreign markets
Print Edition
A NEW scheme allowing Chinese people to invest in financial markets overseas will be launched this year at the Shanghai free trade zone, a city financial regulator said yesterday.
Also under the program, authorities will raise the annual foreign exchange quota for Chinese residents, which is currently capped at US$50,000.
“We are working with state-level regulators on measures to facilitate foreign exchange for individuals, and raise the cap gradually to US$200,000 to US$300,000 a year,” said Zheng Yang, director of the Shanghai Financial Services Office.
The scope of cross-border investment allowed under the new program for residents within the Shanghai FTZ will include securities, real estate and other business ventures, Zheng said.
Details of who will be eligible are yet to be finalized, but a draft suggests that to qualify individuals must have been employed within the Shanghai FTZ for a year, and have a legitimate tax and social security record.
The program will also use the free trade account, which was launched last year to facilitate cross border transactions in the zone.
Regulators have said that cross-border investment and capital flows through the account enjoy greater freedom but underscored that activity is monitored for potential financial risks.
So far, only banks in Shanghai can open free trade accounts for their FTZ clients. The authorities have repeatedly said they will allow brokerages and insurance companies to open such accounts in the future for investment purposes.
There are also plans to use the free trade account to allow foreigners working in the zone to invest in Shanghai’s financial markets, but nothing has been made public.
Offshore investors can now trade gold in yuan after an exchange was opened in September within the Shanghai FTZ. Bullion trading at the exchange has reached 1,026 tons, or 224.3 billion yuan, as of March this year.
The trading of crude oil futures, originally scheduled to start last year, is slated for the third quarter of this year.
Individual investors in China still face restrictions. The Shanghai-Hong Kong Stock Connect launched in November allows domestic investors to invest in the Hong Kong stock market, but only within the daily cap of 10.5 billion yuan and a total ceiling of 250 billion yuan.
The daily quota for Chinese mainland residents investing in the Hong Kong stock market under the stock connect program was used up on April 8.
Individual investors on the mainland with their securities account balance below 500,000 yuan are currently barred from participating.
A world-beating rally at two bourses in Shanghai and Shenzhen has also spurred domestic investors to raise their bets on stocks listed in China. Both the benchmark Shanghai Composite Index and Shenzhen Component Index doubled in the 12 months through April 30.
Another program, Qualified Domestic Institutional Investor, allows financial institutions in China to apply to invest in foreign financial markets.
Nearly US$90 billion of foreign investment had been approved under the scheme as of April 29, according to figures from the State Administration of Foreign Exchange.
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