Source: Global Times    Published: 2020-06-18

China on Thursday released a plan to lower the threshold for foreign investment in Chinese listed companies, a move an expert said is set to advance the internationalization of the domestic capital market as the country's pursuit of high-quality growth welcomes more global participants.

China's Ministry of Commerce (MOFCOM) on Thursday issued a draft to solicit public opinion on the administrative measures for foreign investment in listed Chinese companies. It proposed an effective easing of the investment threshold by lowering the total asset requirements for foreign investors that are not controlling shareholders.

Required assets of foreign shareholders will be reduced to $50 million from $100 million, and assets they manage will be cut to $300 million from $500 million, noted the ministry. The lock-up period for foreign investors' holdings will be adjusted from three years to 12 months.

"As a major country in the global industrial and supply chains, China bears an important responsibility for global economic stability. Lowering the threshold will promote the optimal allocation of Chinese and foreign resources and also drive the diversification of equity," said Dong Shaopeng, an adviser to the China Securities Regulatory Commission.

It is an inevitable trend for the Chinese capital market which will further advance the internationalization of the market, Dong told the Global Times on Thursday.

For a modern market ruled by law, sources of capital should no longer be treated differently in non-restrictive and non-prohibited industries, but equally based on the controller of the capital complying with the law and having competitive competence in the market, Dong said.

"The high-quality development of China's economy requires opening up and welcomes more global market players," he said.

The new regulations also show the confidence of China's market regulators, which have strengthened efforts to keep improving their supervision level, experts said.

Chinese regulators are expected to increase the transparency of their supervision, Dong said, noting that foreign investors who violate laws and regulations should be penalized based on law.

The draft also proposed the elimination of the requirement for foreign investors to implement strategic investment through the direct issuance of new shares via listed companies.

It said the required shareholding ratio of foreign firms that plan strategic investment through agreed transfer will be reduced from 10 percent to 5 percent, according to MOFCOM.

And for foreign companies that seek strategic investment by tender offer, the proportion of shares of the listed company scheduled to be acquired should not be less than 5 percent of issued shares.

Dong Shaopeng is senior fellow of Chongyang Institute for Financial Studies at Renmin University of China.