Cross-border schemes key to China easing capital controls
Expected increased capital flows from wider access to mainland markets will improve the prospects of the yuan becoming a global currency
A hoped-for expansion in the number of cross-border trading schemes with the mainland is likely to serve as the springboard for a further easing in capital controls by Beijing next year.
Analysts and bankers also believe the increased capital flows resulting from wider access to the mainland stock markets will boost the prospects of the yuan becoming an international investment currency.
Brett McGonegal, the chief executive of financial services firm Reorient Group, describes the tie-up between the Shanghai and Hong Kong markets under the through train stock scheme as "a huge step in opening up the capital account".
"This is a very important event in practice but also extremely symbolic in the progression to a globalised currency," said McGonegal, who described last month's launch of the Stock Connect scheme as the most significant currency development since the introduction of the euro.
"I think a connect scheme between Shenzhen and Hong Kong will most likely be next, followed by an extension in the reach of the Shanghai-Hong Kong link to other markets."
Such schemes would attract more international players to invest in yuan products, he said, referring to a key policy goal of the central government for the internationalisation of the yuan.