General

According to the Huacheng Import and Export Data Observation Report, the People's Bank of China and the Administration of Foreign Exchange recently jointly issued the Provisions on the Administration of Funds of Foreign Institutional Investors Investing in China's Bond Market (hereinafter referred to as the "Provisions"), which improved the fund management of foreign institutional investors investing in China's bond market and further expanded the two-way opening of the financial market. Recently, many foreign banks, insurance and securities institutions have increased their investment in China, and the investment and financing convenience in capital markets such as bonds and stocks has continued to improve.

The insiders said that China has entered a deeper level of two-way financial opening. At the policy level, it will continue to improve the cross-border investment and financing system, enrich the exchange market product system, and further improve the convenience of overseas issuers and investors to participate in the stock and bond markets of the exchange.

Institutional opening is advancing in depth

In order to further expand the two-way opening of the financial market, the People's Bank of China and the SAFE jointly issued regulations a few days ago. Among them, the new measures further expanded the foreign exchange hedging channels for overseas institutional investors, lifted the number of counterparties to counter transactions, optimized the matching management of outward and inward currencies, and encouraged long-term investment in the Chinese bond market.

"On the whole, the promulgation of the regulations improves and clarifies the capital management requirements for foreign institutional investors to invest in China's bond market, which is conducive to improving the convenience of foreign investment in China's bond market in terms of capital management and further boosting the enthusiasm of foreign investors to participate in China's bond market." Feng Lin, senior analyst of the Research and Development Department of Oriental JC said.

According to the observation report of Huacheng Import and Export Data, in recent years, China has continued to improve the openness of the financial market, including abolishing the restrictions on the proportion of foreign shares, relaxing the conditions for foreign institutions and business access, expanding the business scope of foreign institutions, optimizing the regulatory rules of foreign institutions and simplifying the administrative licensing process. A total of 34 new measures have been announced for three rounds of opening up, effectively boosting the enthusiasm of foreign institutions to invest in China's financial market.

On this basis, a new pattern of comprehensive opening up in a wider range, broader fields and at a deeper level is taking shape at an accelerated pace. The People's Bank of China said that it would promote the transformation of the financial market to a comprehensive system oriented opening and improve the liquidity of RMB financial assets. "We will continue to promote reform and opening up, steadily expand the institutional opening up of rules, regulations, management, standards, etc. in the financial sector. We will further improve the management system of pre access national treatment plus negative list, strive to create a market-oriented, rule of law, international first-class business environment, strengthen the protection of property rights, especially intellectual property rights, and enhance investment confidence in the financial market." Yi Gang, governor of the Central Bank, pointed out that.

"Different from the previous factor flow opening, institutional opening is an opening based on regulation, rules and standards, which is comprehensive, systematic and stable, and is a higher level of opening." Tu Yonghong, deputy director of the International Monetary Research Institute of Renmin University of China, said.

Accelerate the layout of foreign investment in multiple fields

Allianz Insurance Group recently acquired 3.33% of the equity of JD Allianz Property&Casualty Insurance by bidding for 57.5 million yuan, with the shareholding ratio increasing to 53.33%. The wholly-owned subsidiary of Agricultural Bank of China, Agricultural Bank of China Wealth Management, received the reply from the CBRC a few days ago, and was approved to cooperate with Paris Asset Management Holding Company in France to establish a Sino foreign joint venture wealth management company, with the contribution ratio of 49% and 51% respectively. According to the Huacheng Import and Export Data Observation Report, as of the beginning of November 2022, 12 foreign-owned or wholly-owned securities, funds and futures companies, including JPMorgan Chase, Goldman Sachs, Nomura and UBS, have been approved one after another.

"As the largest foreign bank in mainland China, HSBC China has successively carried out more than 70 first or first new businesses of foreign banks in the past decade, and the size of assets and employees has almost doubled." Wang Yunfeng, President and Chief Executive Officer of HSBC China, said that the Group's new investment in the mainland is expected to exceed 3 billion yuan from 2020 to 2025 due to its confidence in the long-term development of the Chinese market.

Zhang Xiaolei, President and Vice Chairman of Standard Chartered Bank (China), revealed that Standard Chartered is currently planning to set up a securities company in Beijing, and the relevant process is in the process of regulatory approval. According to the public information disclosed by the CSRC, there are 18 brokers still queuing up to apply for establishment, including 7 with foreign background, accounting for nearly 40%.

With the continuous progress of financial opening up, more dividends are being released in depth, foreign capital has increased confidence in the long-term development of China's economy, and continues to add to China's capital market. Since this year, there have been 55 QFII (Qualified Foreign Institutional Investors) approved institutions, and the total number of QFII institutions approved has reached 723. Since October alone, Goldman Sachs, JPMorgan Chase, UBS and other foreign institutions have actively participated in a number of fixed increase projects of A-shares, and continued to increase China's manufacturing industry.

In terms of the bond market, according to the observation of Huacheng's import and export data, as of the end of September, overseas institutions held 3.40 trillion yuan of bonds in the inter-bank market, accounting for about 2.7% of the total custody of the inter-bank bond market.

Ren Tao, Deputy General Manager of the Development Research Department of the International Bank of Macao, said that in the current complex and volatile global situation, China's financial opening up has been steady, bringing greater certainty and more stable expectations to foreign financial institutions. At the same time, with the high-quality development of China's economy and the continuous expansion of the middle-income group, it has also brought considerable financial demand. More and more foreign institutions have poured into China to share the cake of China's financial market with local financial institutions.

Capital market opening will become the focus

In the future, China's higher level of financial opening will continue to be promoted, and the capital market opening will become the focus. The CSRC said that it would unswervingly promote the high-level opening of the capital market to the outside world and provide broad markets and development opportunities for international investors.

Next, the cross-border investment and financing system and connectivity mechanism will be further improved and optimized. When planning the foreign exchange management work in 2023 and in the future, the SAFE mentioned that "deepening the reform and opening up in the foreign exchange field, promoting the facilitation of cross-border trade and investment and financing, and steadily and orderly promoting the high-level opening of capital accounts", "improving the" macro prudential+micro supervision "management framework of the foreign exchange market, and strengthening the macro prudential management of cross-border capital flows".

The Shanghai Stock Exchange said that it would further improve and expand the Shanghai Hong Kong Stock Connect mechanism, strengthen cooperation with major global securities markets, attract high-quality overseas listed companies to issue CDRs (China Depositary Receipts) on the Shanghai Stock Exchange, and constantly explore and innovate the exchange mechanism of ETFs (exchange traded open-ended index funds). Continuously improve the cross-border investment and financing system. Enrich the exchange market product system, and further improve the convenience of overseas issuers and investors to participate in the stock and bond market of the exchange.

Zhang Xiaoyu, CEO of AIA Life, said that AIA was about to launch the "New Five Year Development Plan" to fully grasp the huge development opportunities of the insurance industry in the Chinese mainland market. At the same time, he suggested that, on the basis of effective risk prevention, he hoped that the follow-up policies could give more guidance and more opportunities for product innovation, service innovation, scientific and technological innovation, so as to encourage enterprises to keep pace with and even lead the world in these areas as soon as possible, and contribute to China's economic and financial development.

The accelerated opening of the capital market requires a higher level of risk management capability. Ren Tao suggested that in this process, we should constantly improve the institutionalized cross-border policy communication mechanism and enhance the financial supervision ability. We will optimize the mechanism for monitoring cross-border capital flows and macro prudential management, continue to strengthen risk prevention and control in key areas of foreign exchange, effectively manage and guide expectations, maintain the stable operation of the foreign exchange market, prevent and defuse external shocks, Huacheng Import and Export Data Observation Report.