China plans to lower the threshold for foreign investors to make strategic investment in listed companies in the nation, which is the latest in a series of measures to further open the market.
That’s according to a draft of revised rules released by the Ministry of Commerce, which has been sent for public comments. The ministry said the revisions were drafted to expand the channels of using foreign investment and promote the healthy development of China’s securities market.
“The move is an important incentive for foreign investors to invest in China, a part of the nation’s substantial measures to further open up the economy,” said Li Shuguang, an economist and a professor at China University of Political Science and Law.
In the draft, the ministry suggested that A shares acquired by foreign investors through strategic investment are not tradable for 12 months. Under current rules, such shares are not tradable for three years.
“This shortened lockup period would create more liquidity for foreign investors, so they can control their capital flow in a much more flexible manner,” Li said.
The ministry also proposed loosening controls over the requirements for foreign investors in the draft as follows: To participate in strategic investments in listed firms in China, a foreign company must own actual overseas assets of no less than $50 million or manage actual overseas assets of no less than $300 million.
Current regulations require that a foreign firm own assets of no less than $100 million or manage assets of no less than $500 million.
Li said: “The capital threshold, according to the revised rule, would be lowered by around 50 percent, which will generate fresh opportunities for more foreign investors to enter the Chinese market.”
The ministry suggested reviewing strategic foreign investment applications in national security related areas, in line with national security rules.
This year marks the 40th anniversary of China’s reform and opening-up policy. The government has rolled out a set of measures to facilitate foreign investment and improve business environment.
In early July, the country released a shorter negative list for free trade zones and a list applicable nationwide. The list shows areas where investment is limited or prohibited for foreign investors, with all other areas presumed to be open.
The new list reduces the number of sectors restricted for foreign investors to 45 in all free trade zones, from 95 last year.
Wei Jianguo, a former vice-minister of commerce, said China’s stance on opening-up has offered and will continue to, offer opportunities for other countries to share the benefits of its growth.