COMPANIES & FINANCE ASIA-PACIFIC: China sells A-share idea to foreigners
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By Richard McGregor in Shanghai
Financial Times; Oct 29, 2002
China's securities regulators have taken their campaign to attract foreign investment into locally listed stocks directly to overseas fund managers, a sign that the long-awaited approval for the policy may be near.
Zhou Xiaochuan, the head of the China Securities Regulatory Commission (CSRC), attended a conference in Singapore last week to outline the plan in detail to fund managers.
Officials accompanied him from a number of "A share" companies, including Bao-steel, Shanghai Airlines and the Pudong Development Bank. "A shares" are Chinese domestic stocks, reserved for local investors.
"Zhou's presence is a clear sign that the system for foreign investment is already in the pipeline," said an official from the listed arm of Bao-steel, China's biggest steel maker.
The system, known as Qualified Foreign Institutional Investor (QFII), would allow foreigners to put money directly into the Chinese domestic "A share" market for the first time.
A top-level political decision will be required before the policy is implemented, making predictions about the timing of its final approval difficult.
Any approval will not come before early to mid-November, when senior Chinese leaders will be meeting in Beijing at the five-yearly Communist Party congress.
But the CSRC has pushed much harder recently for approval of the plan, a reflection of their belief that Chinese shares can command a premium at the moment among developing economies.
The QFII proposal is especially sensitive because it requires the central government to "drill a number of official holes in its [non-convertible] capital account", in the words of one analyst.
It may also hasten other pending reforms in China's stock markets, such as the introduction of short-selling and index futures.
Zhou told the Singapore seminar that under the CSRC's plan, overseas investors would be able to put money into any Renminbi-denominated instruments, including treasury and corporate bonds, and stocks.
As in Taiwan, which also has a QFII system, there will be a lock-up period of between one to three years before any returns can be repatriated.
Foreign investors are keen to find new ways of investing in China, but remained concerned about the high valuations of mainland-listed companies, and also about the length of the lock-up period.
But after a period of policy inertia, the CSRC's new drive has heightened optimism about imminent approval for the policy.
"The arrow is already on the bow," said one foreign securities executive, employing a Chinese idiom to indicate that the go-ahead was near. |
