International investors are set to have more freedom when buying A-shares, according to a set of draft amendments to rules on foreign strategic investments published by MofCom on August 2.
MofCom is bringing the lock-up period for foreign strategic investments in A-shares from three years to just one year. The ministry also suggested changing the entry criterion for foreign strategic investors — from owning $100m in assets and managing $500m in assets, to just $50m and $300m, respectively.
However, one amendment may make foreign investors’ life more difficult. Investments categorised as affecting national security will be scrutinised in accordance with the relevant security review mechanisms, said MofCom. The Chinese ministry is consulting the public on the new rules between now and August 29 .
Thi s comes after the US Congress voted in July to bolster the Committee on Foreign Investment in the US (CFIUS) and strengthen screening of foreign investments, including Chinese ones, which may endanger US national security .
Th e US already restricted eight Chinese entities this week from making investments in the US as they were deemed national security threats, according to Chinese media.
The PBoC has required cross-border financial information providers, such as Swift, to update the central bank on their business operation bi-annually, according to a July 27 policy document by the PBoC. The new rules came into effect immediately.
Foreign service providers must report to the PBoC in writing, before January 20 and July 20 of every year, with details of their onshore operation, including a complete list of their clients, the kinds of services they are providing and the scale of their business.
Any new foreign company to notify and register with the PBoC in writing 30 days before beginning to offer services to onshore entities. Among other things, they need to disclose the mechanism they use to protect the safety of their operation and the information they process and their anti-money laundering systems.
The rules also specified that foreign service providers are not allowed to establish financial information network and services in Mainland China.
Li Keqiang, premier of China, has reaffirmed Beijing’s commitment to launching the London Shanghai Stock Connect this year. In a July 31 meeting with Jeremy Hunt, the newly appointed UK foreign secretary, Li said the two countries should seize the opportunity of the London Connect to create more drivers for growth, and more closely co-operate on all fronts.
The Chinese premier added that China will strive to create a better business environment for all foreign businesses in China, including UK companies. Separately, he said the UK and China should work together to defend an open world economy and the multilateral trade system.
Li’s comments came one day before US president Donald Trump turned up the heat on China in the ongoing trade conflict. He directed Robert Lighthizer, the US Trade Representative (USTR), to consider raising the 10% planned tariffs on $200bn of Chinese goods to 25%, according to a statement by USTR.
In an August 2 statement, MofCom accused the US of inconsistency, as Washington expressed its wish to negotiate with China at the same time as it increases its threats. This strategy will not work on Beijing, MofCom insisted.
"China has always advocated resolving disputes through dialogues," said the statement. "But the premise is equal treatment [of parties involved] and staying true to one's words."