China Securities Regulatory Commission (CSRC) in Beijing Photo:VCG

The China Securities Regulatory Commission (CSRC) is formulating specific short-term trading systems for foreign investors to facilitate their investment in the A-share market, as China steps up effort in expanding opening of its capital market, the Shanghai Securities News reported on Sunday.

The move is conducive for foreign investors to participate in the A-share market, stabilizing foreign investment expectations, and promoting the high-quality development of the capital market, experts said.

The CSRC is studying specific two short-term trading systems for foreign investors, namely allowing qualified overseas public funds to calculate the amount of securities held by product with reference to domestic public funds, and exempting the Hong Kong Securities Clearing Company (HKSCC) from certain specific short-term trading system, Shanghai Securities News reported.

Relevant measures have been basically formed and will be announced and implemented in due time.

This move can facilitate foreign investors to participate in short-term trading in compliance with law, facilitate reasonable adjustment of short-term capital allocation, and enhance market attractiveness, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Sunday.

“It also embodies the equal regulatory treatment for domestic and foreign investment,” Dong said.

Short-term trading refers to a strategy in which major shareholder or high ranking executives of a listed company trade company's stocks or other securities with the nature of equity in a relatively short period of time.

According to the securities law, the buying and selling activities of the above specific entities within six months belong to short-term trading. At the same time, the Securities Law authorizes the CSRC to prescribe exemption situations.

CSRC has allowed domestic public funds to calculate the securities by product and if a fund company holds 5 percent or more of the same company's shares and buys and sells them within six months, it is not considered as a short-term transaction.

Under the Shenzhen-Hong Kong Stock Connect and Shanghai-Hong Kong Stock Connect, foreign investors can have access to the A-share market through HKSCC. At the same time, there is no essential difference between overseas public fund managers and domestic public fund managers in terms of internal control, governance structure and investment management mode.

In recent years, the two-way opening of Chinese capital market has been expanding, and foreign capital has gradually become one of the important participating forces in A share market. 

As of end of September 2022, the market capitalization of A-shares held by foreign investors reached 2.77 trillion yuan ($385 billion), accounting for 4.35 percent of the total amount. From January to September, 2022, cumulative net inflows into the A-share market through the stock connect between reached more than 52 billion yuan.