China to Let Smaller Groups List in Hong Kong
Yao Gang, vice-chairman of the China Securities Regulatory Commission, pledged to “deepen” China’s capital markets reforms and to make sure Hong Kong is one of the main beneficiaries of the changes.
Speaking at the Asian Financial Forum in Hong Kong, Mr Yao said the CSRC would lower the size threshold for Chinese companies listing in Hong Kong and “open the door wider for small and medium enterprises to list in Hong Kong”.
Until now, Chinese listings in Hong Kong — one of the main routes for foreigners to invest in China — have been dominated by large state-owned enterprises such as banks and energy companies.
The reforms, which will give overseas investors broader access to Chinese companies, will be welcomed in Hong Kong, which has long feared losing out to Shanghai as a centre for investment in China.
The decision is made as the Chinese government has come under pressure to do more for China’s private companies, which provide the bulk of economic growth and jobs. Such companies have been more directly affected by the banks’ tight credit policies than their competitors in the state sector.
“In terms of both policy and finance, privately owned companies don’t have the advantages of state-owned enterprises,” said John Zhao, founder and head of Hony Capital, a Chinese investment firm.
“In overcoming the crisis, the policy again favoured the SOEs and presented more pressure on the privately owned enterprises. Relaxing government controls would help.”
Mr Yao added that the regulator would allow qualified foreign institutional investors greater access to renminbi with which they can invest in Chinese companies on the domestic market. He also reiterated promises that China is considering introducing Hong Kong-listed ETF products that would track the domestic A Share index, as well as sanctioning more renminbi-denominated bonds and shares in the city.
“He has reaffirmed China’s commitment to reform,” said Anita Fung, chief executive of Hong Kong for HSBC.
But many in the audience felt Mr Yao showed how reluctant regulators remain to relax the rules. Despite his pledge to “upgrade” requirements for Chinese companies listing in Hong Kong, the CSRC’s powers to set quotas for overseas investors remain intact.
Also, in spite of the talk of expanding quotas for foreign investors in Chinese financial markets, they remain small, whether for the big international asset managers or sovereign wealth funds.
“They used to talk in Beijing of crossing the river by feeling the stones,” said the head of government relations at one major international bank. “Now they just feel the stones.”
Indeed, many of the speakers from the mainland also called for more bold changes. For example, Tu Guangshao, vice-mayor of Shanghai, called for China to let interest rates float freely, at a time when the combination of artificially low rates on both deposits and loans and tight controls on bank credit have spawned a huge shadow banking system.
“The biggest risk is shirking from reforms,” said Tomson Li, chief executive of TCL, a Chinese consumer electronic maker.
Under its new chairman, Guo Shuqing, the CSRC is expected to quicken the pace of change.