CSRC Vice Chairman Addresses SSE Global Investors Conference 2021

25 Oct 2021

Distinguished guests, ladies and gentlemen:

Our warm welcome goes to the investors from all over the world attending the third Shanghai Stock Exchange (SSE) Global Investors Conference. First of all, on behalf of the China Securities Regulatory Commission (CSRC), I would like to extend warm congratulations on the convening of the conference, and express our appreciation to the investors worldwide who have long cared for, supported and participated in the development of China’s capital market.

Faced with the impact of the coronavirus pandemic and the changes in the international economic situation, the opening up of China's capital market has not slowed down. Instead, it is characterized by faster speed, reinforced momentum and expanded scope. The remarkable results of a series of opening-up measures in recent years have promoted the expansion of market scale and quality improvement. China's capital market has become an increasingly important place for global assets allocation. It is good to have this opportunity to share with you some of my views on the latest developments of the capital market and the expansion of institutional opening-up.

1. The reform and development of the capital market has been accelerated.

First, the registration-based IPO system has undergone smooth reform. Since the successful landmark launch of the SSE STAR Market characterized by the registration-based IPO system on the SSE in July 2019, the CSRC has, in the past 2-plus years, implemented the requirements for focusing on information disclosure, and facilitated the formation of the “three-step” reform scheme for the registration-based issuance system characterized by the process of implementation from the SSE STAR Market to ChiNext and then the entire market. The CSRC has done so in accordance with the three principles, namely, “respecting the basic rules of the registration-based issuance system, learning from international best practices, and reflecting the Chinese characteristics and development stages”. All this coordinates the advancement of the key institutional innovations in the IPO underwriting, refinancing, trading, continuous regulation and investor protection. Major progress has been made in the pilot reform program of the registration-based issuance system. Firms, investors, intermediaries and local governments have attained a sense of gain to varying degrees.

Second, remarkable results have been achieved in serving the development of the real economy. Serving the real economy is the fundamental aim of the capital market. As of October 22, there were a total of 4,523 A-share listed companies, with a total market value of RMB87.2 trillion, about 86% of China’s GDP; and in the past five years, more than 1500 IPOs took place, with the total IPO and refinancing amount exceeding RMB5.5 trillion, providing large amounts of equity capital for the development of a large number of innovative enterprises. While continuously improving the multi-tiered capital market system, the CSRC has been striving to enhance the ability to serve small and medium-sized enterprises. We have also deepened the reform of the National Equities Exchange and Quotations (NEEQ) market, and made effective efforts in the establishment of the Beijing Stock Exchange. In June this year, the official listing of the first batch of 9 infrastructure public REITs further enriched the investment and financing products serving the real economy on the capital market.

Third, ongoing improvement has been made in the judicial and law enforcement systems and mechanisms for securities. The Opinions on Cracking Down on Illegal Securities Activities in Accordance with the Law, issued on July 6 by the General Office of the CPC Central Committee and the General Office of the State Council, provided an important guarantee for comprehensively deepening the reform of the capital market, better protecting investors, and advancing the high-quality development of the capital market. The CSRC has worked with relevant agencies to set up a coordinating working group for cracking down on illegal activities in the capital market. All this aims at comprehensive implementation of the “zero tolerance” policy, crackdown on illegal securities activities in accordance with the law, and further improvement of the market environment.

2. Orderly progress has been made in the high-standard opening up of the capital market.

First, the stock market continues to open wider. Opening-up broadens the sources driving the development of China's capital market, and the participation of overseas financial service institutions and investors plays an important role in enhancing the service capabilities of China's capital market and improving the structure of investors. With regard to support for institutions, as the shareholding ratio restrictions for foreign ownership in securities, funds, and futures companies have been completely removed, foreign-owned institutions now enjoy national treatment in terms of business scope and regulatory requirements. Up to now, approval has been made for the establishment of 9 foreign-controlled securities companies, 3 wholly foreign-owned fund companies and 1 wholly foreign-owned futures company. In addition, branches and subsidiaries of foreign banks based in China are allowed to apply for the qualification of custodian of securities investment funds. At present, the applications of the subsidiaries of three foreign banks in China for the qualification of fund custody have been approved. In July this year, there were foreign banks that had officially launched the fund custody services within China. In terms of the market, improvements have been made for the Shanghai and Shenzhen-Hong Kong Stock Connect mechanisms and the QFII, RQFII systems, with the constant expansion in the scope of investment; and the Shanghai-London Stock Connect mechanism has been operating stably. Overseas funds are flowing into China's capital market in a sustained and steady manner. From January to September this year, overseas investors recorded a net purchase of nearly RMB200 billion of A-shares through such channels as QFII, RQFII and the stock connect mechanisms in Shanghai and Shenzhen; particularly, the net purchases from July to September amounted to RMB21.6 billion. As of the end of September 2021, the market value of the tradable A-shares held by overseas investors stood at RMB3.53 trillion, accounting for approximately 4.8% of the total tradable market value. In terms of products, the China-Japan ETF Connectivity products are running smoothly, along with the official launch of the Shenzhen-Hong Kong and Shanghai-Hong Kong ETF Connectivity products and the overseas listing of asset management products that track Chinese indices such as the STAR 50 Index. Recently, as the participation of qualified foreign investors in futures and option products of Chinese mainland has been further relaxed, and the MSCI A50 Index futures have been launched in Hong Kong, it is much more convenient for overseas investors to engage in A-share investment and risk management.

Second, the opening up of the bond market has been accelerated. The CSRC, together with the People's Bank of China and the State Administration of Foreign Exchange, has publicly solicited opinions on the announcement on the matters related to foreign institutional investors’ investment in the bond market. To further facilitate the issuance of panda bonds by foreign institutions in China, the CSRC is making renewed effort to implement the system for overseas institutional investors’ participation in the exchange bond market, and draft the measures for the administration of panda bonds on the exchange market.

Third, the internationalization of the futures market is advancing steadily. In terms of “bringing in”, with the continuous expansion in the range of the futures products accessible to overseas investors, the number of internationalized commodity futures and option products going up to 9, and the overseas traders’ average daily trading volume of the eligible products accounting for about 10% of the total, the internationalization of China’s commodity futures market has improved stably. In terms of “going global”, we support domestic futures exchanges in carrying out various forms of cooperation with overseas exchanges and financial institutions. After the Shanghai Futures Exchange and the Norwegian Pulp and Paper Exchange signed a pulp futures settlement price authorization agreement on September 18, 2020, related products were listed in Norway on October 16 last year, and the pulp futures have become China’s first futures product “going global” through the settlement price authorization. Recently, upon its smooth completion of the second reading, the long-awaited Futures Law is expected to lay a solid foundation for the opening up and development of China's futures market after its promulgation in the near future.

3. Efforts have been made to deepen the institutional opening up of the capital market.

The high-standard institutional opening up of the capital market is an important part of deepening reform and expanding opening up of China's financial sector. We are striving to push forward the high-standard opening up of the capital market in accordance with the unified deployment for China’s new round of high-standard opening up, by adhering to the market principle and rule of law, and drawing on the best international practices.

First, we will continue to optimize the mechanisms and tools. We will effectively implement the new regulations for qualified foreign investors, improve and expand the mechanisms of Shanghai and Shenzhen-Hong Kong Stock Connect, Shanghai-London Stock Connect, and China-Japan ETF Connectivity. We will provide more diversified investment options and risk management tools for investors across the world with broader opening up of the futures market on the current basis.

Second, we will continue to improve the policy supply. It is necessary to drawn on the best international practices, continue to facilitate the settlement of the key concerns about the institutional opening up, and attach importance to the stability, transparency and predictability of the policies. We will continue to expand and optimize the channels and modes for foreign investments to participate in China's capital market, and promote the in-depth adaptation of systems, rules, and standards. We will enhance the system for domestic offering and listing of overseas entities, and strengthen the regulatory arrangements for the overseas listing of domestic enterprises, so that Chinese enterprises can make better use of both capital markets at home and abroad. We will improve the trading and settlement system and deepen the interconnection between domestic and foreign markets. In addition, by accelerating the introduction of investors from all over the world, we will drive the steady enhancement of the capital market and its services through a higher level of opening up.

Third, we will continue to strengthen international cooperation. We will carry out pragmatic cooperation with related parties based on the principles of mutual respect, effective communication, and mutual benefit, and accelerate the settlement of the issues concerning the audit and supervision of companies in overseas listings. Meanwhile, we will further boost our regulatory capacity in the context of opening up, and enhance the monitoring, analysis and judgment of cross-border investment operations and capital flows in the capital market. All this aims to “see clearly and regulate effectively” all major cross-border transactions.

Ladies and gentlemen, the continuous growth of the Chinese economy and the huge development potential of the capital market in China provide exceptional opportunities for global investors. We sincerely welcome more overseas investors and financial institutions to seize the opportunity to expand their investments and operations in China, share the dividends of the steady growth of the Chinese economy, and jointly promote the healthy development of the world economy.

I wish this conference a great success, thank you!