Foreigners Can Now Invest in China's Domestic Stock Market

By That's, September 18, 2018

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In a move to further open up its stock markets, the country's top security regulator is now allowing foreign individual investors to have onshore security accounts, China Daily reports. The regulation officially went into effect September 15, finally granting foreign investors access to the world's third largest stock market.

This means that foreigners are allowed to have expanded access to domestic A-shares. The move to open up A-shares to investment by foreign individuals was given the green light by the State Council earlier this yearXinhua reports that the new measure is expected to "expand the investor base, introduce more liquidity, improve the investor structure, and make the A-share market more open and international.”

Previously, A-shares were typically only available for Chinese citizens to purchase (though some foreign institutions were given permission to buy them in 2003). A-shares are traded in renminbi in the Shanghai and Shenzhen stock exchanges, while B-shares are traded in foreign currencies. The government began allowing both domestic and foreign investment in B-shares in 2001.

So who's now allowed to open A-share security accounts under the new policy? Foreign nationals who are employed in China or those who work abroad for A-share listed firms and participate in their equity benefit programs are eligible to invest. According to Caixin, they must provide an employment certificate and copy of the company's business registration to participate, and the brokerage firm they choose to work with must take an audio-visual recording of the sign-up process.

Their home country's local securities regulatory agency also needs to have signed a partnership agreement with the China Securities Regulatory Commision (CSRC). So far, the list totals to more than 60 participating countries and regions, including Hong Kong, the US, the UK, Singapore, Australia, Malaysia and Japan. Under all those requirements, an estimated 400,000 to 500,000 expats living in China would eligible to invest.

Of course, there are some restraints. For example, there's a 20 percent limit each month on repatriation of funds to other countries, according to Investopedia.

The opening up of China's A-share market comes at an interesting time. Just last month, Japan dethroned China to become the world's second biggest stock market, knocking the Middle Kingdom down to number three. Making matters worse, Caixin reports that China's stock market this week has slumped to some of the lowest levels it's seen since 2014.

Then, of course, there's that whole trade war with the US, which further escalated today with President Donald Trump's newly announced tariffs.

[Top image via Pexels]

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