Britain and China promise to speed up work on London-Shanghai stock connect

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PUBLISHED : Saturday, 16 December, 2017, 6:40pm
UPDATED : Monday, 18 December, 2017, 2:49pm

China and Britain have promised to continue and strengthen cooperation on a wide range of economic, financial and trade issues, including speeding up the introduction of a London-Shanghai stock connect programme.

In a joint statement on Saturday, coinciding with a visit to China by British finance minister Philip Hammond, the countries also said they opposed trade protectionism and reaffirmed their support for the World Trade Organisation as a key pillar of the global trade system.

The statement came as China, in an unusual step, accused the United States and the European Union of breaking promises that they made when China joined the WTO.

Speaking at a press conference in Beijing together with Chinese vice-premier Ma Kai, Hammond said the two countries were also discussing a long-awaited London-Shanghai stock connect programme, as well as a possible scheme to connect their bond markets.

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“We have agreed to accelerate the final preparations for the London-Shanghai stock connect initiative and we’ve agreed to commence feasibility studies for a UK-China bond connect and for mutual recognition of funds between the two jurisdictions,” he said.

Other areas of cooperation highlighted in the joint statement include encouraging each country’s banks to increase their presence and activity in the other country, the promotion of a China-UK cross-border yuan business, and support of the yuan as a settlement currency.

China and the UK will establish a new joint expert group to exchange views on macroeconomic and fiscal policy, the joint statement said.

Former British prime minister David Cameron will also be involved in a proposed US$1 billion bilateral investment fund, the statement added.

Talks on the Shanghai-London stock connect scheme, which would allow investors on one bourse to invest in the other, started two years ago, but progress has been slow partly due to Britain’s decision to leave the European Union.

Closer ties between China and UK’s capital markets would be welcome by London, whose future as a global financial hub is clouded by Brexit.

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It would also be a boon to the London Stock Exchange Group, which is grappling with turmoil that saw the departure of chief executive Xavier Rolet recently.

For China, connecting London and Shanghai’s exchanges would mark another milestone in its capital markets deregulation. Beijing’s commitment to financial reform has won global recognition as US index publisher MSCI has agreed to include China A-shares into its global indexes next year.

The London-Shanghai stock connect is modelled after a similar scheme that links Hong Kong and Shanghai, but unlike the Shanghai-Hong Kong stock connect, it faces more technical and regulatory challenges partly due to the difference in time zones.