China looks at market opening steps

CHINA is considering steps to allow overseas firms to float shares in the country and foreign institutions to invest yuan they hold in domestic markets, state media yesterday quoted a government document as saying.

The government will draft rules for overseas firms to list in China and make necessary preparations for the opening, according to the documents signed by eight government departments, including the top planner, the National Development and Reform Commission.

China has been talking about the launch of an international board in the Shanghai Stock Exchange to encourage foreign listings. It was about to kick off the new board in the second half of last year but the move was delayed by the erupting euro zone debt crisis.

This year, China has conducted a slew of market reforms, including to improve initial public offering rules to clamp down on excessive speculation in newcomers and a plan to launch a high-yield bond market for small companies to raise funds.

It has also doubled the yuan's trading band against the dollar and plans to launch a slew of derivatives, such as government bond futures, in a bid to offer corporations more hedging tools.

"Currently and in a coming period of time, the global economic structure will be faced with deep adjustments," said the document, also signed by the People's Bank of China, the central bank, and the Ministry of Finance.

"We must stick to reforms and innovations."

The government would also consider letting foreign organisations issue bonds, mutual funds, while expanding the channels for domestic investors to invest in overseas securities, the document said.

China has so far permitted only a handful of international organisations to sell limited numbers of bonds in the country, while Chinese citizens are allowed to trade foreign securities only via the Qualified Domestic Institutional Investors (QDII) in a limited quota system.

International financial organisations, overseas currency authorities and foreign companies will be allowed to invest yuan they hold in China's financial markets, the document said without giving a timetable for the measures.Reuters