Strategy
Date:2019/11/19

The RMB exchange rate returns to “6”, which immediately attracts high attentions from all sides. In the last month, the exchange rate of the RMB against the US dollar has risen nearly by 2%, which benefits from China’s overall opening up in the financial sector. The financial opening up has provided stronger support for a long-term stable RMB exchange rate. With the ever-deepening financial opening up and the sustained introduction of cross-border capital, the RMB assets are becoming more attractive in the international investment market.

Judging by the development of the Chinese financial sector in recent years, the financial opening up is accelerating, as the access thresholds for banking, insurances, securities, and other financial institutions are lowered and the financial and capital markets are opened.

In May 2019, China Banking and Insurance Regulatory Commission issued 12 new opening up measures for the banking and insurance industries in terms of removing restrictions on the shareholding ratio held by foreign investors and easing the market access requirements. In July 2019, basing on deep researches and evaluations, the Office of the Financial Stability and Development Committee under the State Council released another 11 new opening up policy measures, covering the pension management companies, wealth management companies, bond markets and other aspects. In September 2019, the State Administration of Foreign Exchange announced to cancel the investment quota limits for Qualified Foreign Institutional Investors (QFII) and RMB Qualified Foreign Institutional Investors (RQFII). Recently, the State Council published Several Opinions on Further Doing a Good Job in the Utilization of Foreign Investment, and mentioned again the acceleration in the financial opening up.

The constant issuing of new measures for the financial opening up has manifested China’s firm determination in deepening opening up and has further attracted foreign-funded financial institutions and overseas investors into the Chinese market. On the one hand, the foreign-funded institutions accelerated their pace to enter the Chinese market. Many financial institutions chose to increase the investment in their Chinese branches or applied for new business licenses. According to statistics, as at the end of the second quarter of this years, the foreign-funded banks totally set up 41 foreign-funded institutions with legal person status, and 116 branches and 151 representative offices of foreign banks in China; the overseas insurance companies set up 59 foreign-funded insurance institutions with legal person status and 131 representative office. On the other hand, foreign capital acceleratively flows into the Chinese stock and bond markets. As at the end of October 2019, the nominal amount of bonds that China Central Depository & Clearing Co., Ltd. (CCDC) held in custody for the overseas institutions reached RMB1.80631 trillion, up by 19.85% from the end of last year, up by 0.65% from last month, an on-going increase for 11 consecutive months.

During the ever-deepening opening up, it is increasingly imperative to implement effective prevention and control over risks. On the one hand, the regulatory authorities are required to further improve the macro-prudential management framework for cross-border capital flows. On the other hand, the domestic financial system reform is required to be “matched” with the opening up process to improve the risk prevention abilities of the system and institutions. In the long run, with the ever-deepening financial reform and opening up, the domestic financial ecosystem will further improve to facilitate the long-term development of the Chinese economy.


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