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Economy

China's forex regulator vows wider opening of capital accounts

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2019-04-18 16:28:51Global Times Editor : Li Yan ECNS App Download

China's foreign reserve regulator vowed on Thursday to continue to push forward reforms in investment systems for foreign investors in the year ahead, a move that is in line with the country's broad efforts to open up its financial market and create a favorable environment for overseas investors in China.

"We will steadily promote the opening of capital accounts, reform the investment system for qualified foreign institutions, simplify access management, and expand the scope of investment - that is, to reform the QFII and RQFII systems," Wang Chunying, spokeswoman for the State Administration of Foreign Exchange (SAFE), told a press conference on Thursday. 

Integration of investment channels in the inter-bank bond market and the panda bond market will be promoted in an orderly manner, and the regulator will also encourage securities and fund companies to enter the foreign exchange market and support innovation in derivatives, including options products, according to Wang.

Industry insiders noted that the participation of foreign capital in China's bond and stock market remains lower not just compared to developed countries, but also lower than some emerging countries.

Foreign investors' holding ratio in China's bond market is only 2 percent, while it is 3 percent in the stock market, SAFE data showed.

"The low participation rate showed that there is still room for foreign investors to buy more Chinese financial products and the Chinese bond market and the stock market will become more involved in the international mainstream index after the second quarter of 2019," Wang said.

China has made substantial progress in financial opening and integration into the global market in the past few years. The Bloomberg Barclays Global Aggregate Index started including China's yuan-denominated government and policy bank bonds on April 1, with a 20-month phase-in period. 

Previously in March, global index provider MSCI announced it would increase the weight of Chinese onshore A shares within its market index by raising the inclusion factor from 5 to 20 percent in three steps.

Apart from opening up, Wang said another major task is to ensure safe and stable foreign reserves in China, noting that it has confidence to achieve this with China's stable economic performance and a favorable external environment.

"China-US trade negotiations have made substantial progress and played an important role in stabilizing market sentiment," Wang said, noting the US Federal Reserve's halt to further rate hikes over this year will be favorable for the nation's capital flows.

In March, China's foreign-exchange reserves grew for the fifth straight month to a seven-month high of $3.099 trillion.

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