China eases requirements on foreign investments in listed companies

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New rule aims to draw foreign funds into yuan-denominated A shares by slashing capital requirements and reducing the lock-up period

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The Shenzhen Stock Exchange in south China’s Guangdong province. Photo: Xinhua

Daniel Renin Shanghai

Published: 11:13pm, 1 Nov 2024Updated: 11:44pm, 1 Nov 2024

Beijing has slashed capital requirements for foreign institutions and companies to buy into China’s listed firms as strategic investors, taking another step towards bolstering investor confidence in the country’s stock market.

Investors who own proprietary assets of no less than US$50 million or have assets under management of at least US$300 million will be eligible to make strategic investments in firms traded on mainland China’s stock exchanges from December 2, according to a new rule published by six government agencies including the Ministry of Commerce and the China Securities Regulatory Commission on Friday.

The existing capital requirements for such investors to buy so-called A shares are minimum proprietary assets of US$100 million or no less than US$500 million of assets under management.

For the first time, individuals who can meet the capital requirements will also be allowed to make strategic investments in A-share firms, according to the new rule.

In China, strategic investment refers to acquiring a stake in a company and holding it for a certain period to seek long-term returns.

“If more foreign capital is flowing into the market to make long-term investments, local investors will be inspired to increase their holdings of A shares,” said Wang Feng, chairman of Ye Lang Capital, a Shanghai-based financial services group. “This is the latest effort by economic and financial policymakers to spur foreign capital influx and drive up the stock market.”

The lock-up period – the span during which shares may not be sold – for foreign strategic investors will be reduced from three years to 12 months under the new rule.