Source: Global Times    Published: 2024-12-02

By Ma Jingjing

China has relaxed rules on foreign investors' strategic investment in listed companies starting from Monday in a move to expand foreign investment channels in China's stock market and encourage foreign investors to make long-term and value investments in the country.

The revised rules, jointly released by six government departments including the Ministry of Commerce and the China Securities Regulatory Commission (CSRC), allow foreign natural persons to make strategic investments in listed companies - a change from the old rules that only allowed foreign legal persons or organizations to make such investments.

Additionally, the capital requirement limit is lowered under the new rules for foreign investors that do not become the controlling shareholders in listed firms. The latest capital requirement will be no less than $50 million in total actual assets or no less than $300 million in total managed actual assets.

"With a lock-in period, strategic investments are generally medium- and long-term capital, which are typical value investments. They are expected to work with domestic patient capital to promote value investment concepts and benefit the A-share market in the medium and long run," Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Monday.

Dong said that the rebound trend of the A-share market will likely continue in 2025 thanks to a package of policies to bolster the economy and encourage industrial investment, as well as accelerated mergers and acquisitions.

The outstanding amount of margin debt balance in Shanghai, Shenzhen and Beijing stock exchanges reached 1.82 trillion yuan ($250.4 billion) by Thursday, showcasing a stable trend compared to the reading of 1.69 trillion yuan at the end of October and 1.43 trillion yuan by September, according to figures from market data provider Wind.

The CSRC, the country's top stock market watchdog, is advancing a new round of deepened and comprehensive reform and opening-up of the Chinese capital market at a faster pace, said Wu Qing, chairman of the CSRC, during a forum which was held in Hong Kong in November.

Wu said more pragmatic measures will be introduced to further open up the market and facilitate cross-border investment and financing.

Amid a package of policies to bolster the economy as well as reforms and opening-up, foreign institutions continue to give optimistic reports on Chinese assets.

The MSCI China Index is expected to yield a return of 5-6 percent in 2025, James Wang, head of China Equity Strategy Research at UBS investment Bank, said in a note sent to media recently. 

Though geopolitical tensions and other headwinds may lead to potential downsides in the short term, Wang noted that any market pullbacks will present more attractive buying opportunities for investors.