Closer Capital Markets Cooperation for Greater Synergy

 between the Mainland and Hong Kong

Speech at the 15th Asian Financial Forum 2022

— by Dr. Fang Xinghai, Vice Chairman

of China Securities Regulatory Commission

10 January, 2022

Honorable Chief Executive Mrs. Carrie Lam, Chairman of HKTDC Dr. Peter Lam,

Distinguished guests, ladies and gentlemen:

Good morning! It is my great pleasure to join you at the 15th Asian Financial Forum. First of all, on behalf of China Securities Regulatory Commission (CSRC), I’d like to extend my warm congratulations on the opening of this year’s forum. Looking back on 2021, under the able leadership of the HKSAR government, Hong Kong has made much hard-won achievements in securing economic recovery, maintaining financial robustness, and preserving social stability. Taking this opportunity, I’d also like to briefly discuss the latest development of the mainland capital markets and our cooperation with Hong Kong.

In 2021, the mainland economy sustained strong momentum under the firm leadership of the CPC Central Committee and the State Council. The mainland capital markets have overcome multiple risks and challenges, both internal and external, and remained sound and stable throughout the year. Deepening reform and opening-up has made new breakthroughs, empowering the capital markets to better serve high-quality economic development. On the stock market, Beijing Stock Exchange opened for business. The pilot registration-based IPO regime on the STAR Market and ChiNext rolled out smoothly. A-shares market was overall stable and ended 2021 with a rise. On the two bourses in Shanghai and Shenzhen, 484 companies raised RMB 535.2 billion yuan through their market debuts and 546 companies raised additional capital through secondary offerings; daily trading volume averaged at RMB 1.06 trillion yuan. Both market vitality and resilience improved substantially. By yearend of 2021, asset under management of the mutual fund industry exceeded a historic high of RMB 25 trillion yuan. A-share market saw a net inflow of foreign capital, totaling RMB 384.6 billion yuan, the highest in the past five years. On the futures market, live hog futures was launched for trading. The contracts, with trading volume and open interest growing steadily over the year, have performed well and gradually function as a guide for pork producers. Guangzhou Futures Exchange and China Commodity Indices Co., Ltd went into operation, further strengthening the institutional structure of the mainland futures market. In addition, we introduced the first batch of commodity options as designated products for foreign investors to further widen foreign access. Also in 2021, daily trading volume and open interest on the futures market averaged at 31 million and 28 million, both setting new historic records. The futures market is becoming more adapted to meet the needs of the real economy. On the exchange-traded bond market, the market operation was overall stable, with new bond issuance in the year approximating RMB 8.7 trillion yuan. It is fair to say that, in 2021, the mainland capital markets, through betterment of scale and structure, have made concrete and solid contributions to the real economy.

Distinguished guests,

The CSRC highly values the complementary advantages and synergized development of the two markets, and keeps deepening capital markets cooperation with our Hong Kong counterparts on multiple fronts and areas, unaffected by challenges from the pandemic or the external environment. New breakthroughs and highlights have been seen in our pragmatic cooperation to connect the two markets, offer more products, empower financial institutions, and facilitate regulatory actions. On market and product connectivity, with joint efforts, successive Stock Connect inclusion arrangements were made for shares of companies with weighted voting rights (WVR), eligible pre-revenue bio-tech companies listed in Hong Kong, and eligible A-shares listed on the STAR Market. Products under ETF cross-listing scheme started trading. And both sides reached a consensus on adding ETFs to the Stock Connect schemes. The CSRC also supported the listing of MSCI China A50 Connect Index Futures in Hong Kong, which makes it more convenient for international investors to manage risk exposures and enhances Hong Kong’s ability to attract and serve global capital. On financing by mainland companies in Hong Kong, the CSRC has always supported qualified mainland companies to list and raise capital in Hong Kong. As of the end of 2021, there are a total of 1222 mainland companies listed in Hong Kong, accounting for 47% of all listed companies here. Going public in Hong Kong not only allows mainland companies to access global capital and invigorate better development, but also provides a unique opportunity for international investors to share the dividends of China’s sustained and steady economic growth. Currently, the CSRC is soliciting public opinions on the revised regulatory rules on overseas listings. We believe that the draft rules, when taking effect, will foster a sound and more predictable regulatory environment for overseas listings and better protect the legitimate rights of global investors. On cross-border operation of financial institutions, currently there are 9 joint-venture securities companies and 2 joint-venture fund management companies with Hong Kong funding, and 1 futures company wholly owned by a Hong Kong-based institution operating in the mainland market. Meanwhile, 34 mainland-based securities companies, 25 mainland-based fund managers and 17 mainland-based futures companies have established branches in Hong Kong or acquired or invested in Hong Kong institutions. On regulatory cooperation, the CSRC and the HK SFC have established regular meeting mechanisms on leadership and working levels, through which to have improved institutional arrangement for cross-border risk prevention and cross-border derivatives regulatory cooperation, and fostered close ties in day-to-day regulation, enforcement assistance, information sharing and personnel exchange, setting up effective regulatory guardrails for market stability on both sides.

Distinguished guests, dear friends,

Looking into the future, the world continues to be reshaped by great uncertainties. Profound changes in global political and economic landscapes could further complicate and imperil economic recovery and sustainable development around the world. Against such backdrop, the role of Hong Kong as the mainland’s financial gateway to the world will be further strengthened. The CSRC will continue to support Hong Kong in cementing its status as an international financial hub and will work to create greater synergy for market development on both sides by leveraging respective advantages. We sincerely welcome more concrete and constructive suggestions from you on the ways to deepen capital markets cooperation between the mainland and Hong Kong.

Last but not least, I wish the forum a full success. Thank you!