China mulls 'end to foreign ownership limits' on financial firms, signals bold effort to remove barriers in reform plan

Top financial regulators highlighted capital market reform plans, including a key concession long-sought after by US trade negotiators that would remove the limit on foreign ownership of domestic financial institutions, as they gathered in Shanghai to discuss how to address internal and external challenges.

Yi Gang, governor of the People's Bank of China, said the central bank would support a pilot programme based in Shanghai to remove the foreign ownership limit in firms providing securities and fund management services.

The effort was part of measures to help build the city into an international financial centre, he said.

Yi was speaking at the Lujiazui Forum in Shanghai on Thursday. The annual forum, which started in the city in 2008, attracts leading Chinese figures in economics and finance from both government and the private sector.

During a keynote presentation in the morning, Vice-Premier Liu He, who is also chief negotiator in trade talks with the US, mentioned "external pressures" facing China, but said the challenge could be turned into an opportunity to boost innovation and development.

Foreign investors and service providers have been seeking wider access to China's financial markets for years. Washington has been urging Beijing to open its services industry, ranging from payment settlement to bond ratings agencies, in recent trade talks.

Since November, Chinese authorities have approved plans by JPMorgan Chase, UBS Group and Nomura Holdings to take majority stakes in local securities ventures, but these joint ventures still cap foreign ownership at 51 per cent.

Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC), said he would push forward with plans to liberalise market access in nine areas. These included a further relaxation on access to capital markets, a broadening of cross-border investment channels and targets, and measures to facilitate trading and fundraising by foreign players.

"China's capital markets have been facing increasing external uncertainties. Regardless of how the external environment changes, we will firmly promote the opening up," Yi said.

The forum also put the spotlight on Shanghai's new technology innovation board, which will promote home-growth technology companies.

The exchange, officially named "STAR Market", should be in operation in about two months, said Huang Hongyuan, chairman of the Shanghai Stock Exchange

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Beijing is also actively exploring cooperation with other stock markets as it seeks to find an alternative to the US, where Chinese companies are at risk of being blocked from accessing capital markets.

David Schwimmer, chief executive of the London Stock Exchange Group, said during the forum that a stock connect programme linking London and Shanghai markets would "start soon", as both sides have worked out the regulatory framework and cross-border trading rules.

On Tuesday, Huatai Securities, one of China's largest brokerages, announced plans to raise US$1.2 billion through the London Stock Exchange. The firm set a price range of US$20 to $24.50 per global depositary receipt, and will become the first Chinese company to sell shares in London.

This article originally appeared on the South China Morning Post (SCMP), the leading news media reporting on China and Asia. For more stories, please download our mobile app, follow us on Twitter, and like us on Facebook.