(April 10, 2012) — China is nearly tripling the amount of money foreign institutions can invest in its capital markets in an effort to ease controls on its highly regulated financial sector.
The China Securities Regulatory Commission announced that international fund managers would be permitted to invest a total of $80 billion in China’s onshore capital markets. This is up from the previous limit of $30 billion. Meanwhile, Bejing also upped the total amount of renminbi that foreign investors can raise in Hong Kong for investment back on mainland China, Reuters reported. Also last week, China’s premier Wen Jiabao asserted that the government aimed to break up the dominance of the country’s state-owned banks.
The regulator asserted that the decision to heighten the quota is meant to “promote opening of the domestic stock market, expand overseas investment channels for the yuan and to meet the needs of foreign investors on the domestic stock market”.
Furthermore, the Securities Association of China has asked regulators to allow some domestic investors trade foreign stocks and bonds directly, the Securities Times reported.
Last month, the HSBC flash purchasing managers index, the earliest indicator of China’s industrial activity, fell back to 48.1 from February’s four-month high of 49.6. New orders sank to a four-month low, an expected rebound in export orders failed to emerge and new hiring slumped to a two-year low.
The MSCI China index only rose by around 11%, on a local currency and dollar basis, with Hong Kong only slightly higher, rising around 15% on both bases.