China relaxes foreign stock investment rules to boost A-share market

Proposed rules include reduced lock-up periods and lowered financial requirements for foreigners

PUBLISHED : Monday, 30 July, 2018, 8:39pm
UPDATED : Monday, 30 July, 2018, 8:39pm

The Chinese authorities have proposed to loosen rules controlling foreign investments in the domestic A-share market, according to a draft published by the Ministry of Commerce (Mofcom) on its website on Monday evening to solicit public opinions.

The lock-up period for strategic investments in A-share listed firms will be slashed to 12 months from the current three years, according to the draft rules by the Mofcom, the China Securities Regulatory Commission, and regulators supervising management of foreign exchange, state-owned assets, tax and market order.

The move comes as China’s stock market officially entered a bear market in June amid criticisms of China’s unfair trade and investment policies from foreign governments, represented by the United States.

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The authorities have also proposed to lower the financial requirements for eligible foreign investors – foreign firm or its controller – to actually own US$50 million in assets, or to manage US$300 million or more in assets.

The thresholds are now at US$100 million and US$500 million respectively.

The statement said draft rules would apply to “strategic investment” made by foreign investors, which excluded a short-term trading scenario. According to the draft, strategic investment could be made via agreements, the issuance of new shares, and tender offers.