The recently held meeting of the Finance Committee of the State Council issued a “prescription” for the problems in the development of the capital market, released the expectation of stable growth, boosted market confidence and gave a “reassurance” to the capital market. In fact, China’s good economic growth expectations and targets, as well as a relatively loose monetary policy in the future, have attracted foreign investors to continue to be optimistic about China’s assets. China is still one of the countries with the strongest attraction for foreign investment.
In March, the Federal Reserve accelerated the tightening of monetary policy, coupled with geopolitical risk concerns, resulting in a significant rise in investor risk aversion. With the launch and implementation of China’s steady growth policy, the certainty of economic fundamentals has been improved, and the risk aversion attribute of RMB assets has been further highlighted. In the past three trading days, foreign capital continued to flow into a shares, Hong Kong shares and China concept shares. The market trading volume was further enlarged and the stock index rose sharply. The statement of the financial commission corrected the previously pessimistic market expectations and proved that the trend of foreign capital continuing to flow into China’s stock market will not change fundamentally.
In recent years, the two-way opening of China’s capital market and a number of reform measures have been successfully implemented. MSci (Mingsheng) and other mainstream international index companies have successively incorporated Chinese A shares into their index system; The restrictions on the proportion of foreign shares in the three major fields of securities, funds and futures were fully liberalized, and a number of foreign-funded institutions accelerated the layout of the Chinese market. With the increasing international influence of China’s capital market, foreign capital continues to be optimistic about Chinese assets, and the scale of Chinese bonds held by foreign investors has also reached a record high. According to the data, the cumulative net purchase of northbound funds exceeded 430 billion yuan in 2021, an increase of more than 100% compared with the whole year of 2020. The net increase in domestic RMB bonds held by overseas institutions rose for 10 consecutive months.
The main reason why foreign investors are optimistic about China is that they have confidence in China’s economic fundamentals, which has something to do with the deepening reform of China’s capital market and the continuous improvement of the market ecology in the past few years. Looking back, a series of landmark reforms such as the science and innovation board, the gem, the new third board and the Beijing stock exchange have been successfully implemented, breakthroughs have been made in key institutional innovation represented by the pilot registration system, the quality of listed companies has been continuously improved, the normalization mechanism of new share Issuance and delisting has been effectively brought into play, the investment force of professional institutions has continued to grow, the capital structure and investor structure of the market have been significantly improved, and the judicial system and mechanism of securities law enforcement have been further improved.
We have resolutely investigated and dealt with a number of major and important cases with bad market impact. The judgment of the first special representative litigation of securities disputes “Kangmei case” has been implemented, and the “zero tolerance” deterrent has become more prominent. After a series of reforms, the capital market has shown a new situation.
In the future, the opening-up of the capital market will continue. We should not only steadily expand the high-level two-way opening-up of markets, institutions and products, deepen the interconnection of domestic and foreign markets, but also create conditions to promote greater progress in China US audit and supervision cooperation, strive to form specific cooperation plans, accelerate the implementation of regulatory systems and policies for overseas listing of enterprises, and continue to firmly and orderly support qualified enterprises to list abroad in accordance with laws and regulations, We will continue to strengthen the building of regulatory capacity under open conditions. This series of moves will accelerate the formation of a high-level opening-up pattern of the capital market.
In recent days, a number of A-share companies have planned to issue GDR, demonstrating their determination and confidence in a new round of connectivity, openness and innovation. In the long run, it is the general trend for Chinese enterprises to list abroad. Continuing to attract foreign capital to pay attention to Chinese assets will also be the essence of the opening of the capital market system. With the continuous improvement of various systems of China’s capital market and the continuous improvement of economic level and regulatory capacity, it can be predicted that the Chinese market will accept a larger number of overseas institutions and international capital in the future, and more and more Chinese institutions and enterprises will go out to promote a virtuous cycle of Chinese and foreign capital markets.
