Bloomberg News October 18, 2021

  •  China is opening financial market to attract more investments
  •  Opening comes amid heightened political, market tensions

China’s regulator expanded the investment scope for foreign investors, adding key commodity and stock market derivatives in the latest move to open its financial markets even as Beijing’s crackdown on a broad section of its private sector has roiled markets.  

Qualified foreign investors will be able to trade commodity futures, commodity options and stock index options, China Securities Regulatory Commission said on its website on Friday. The changes will take effect in Nov. 1.

China is opening its financial markets to bring in more foreign investments to redirect its export-led economy. The country has also opened to foreign banks taking full ownership of investment banks, asset managers and other ventures. Goldman Sachs Group Inc. on Monday announced it had received approval to take full ownership of its securities venture, easing its push to expand in China.   

There’s increasing interest in products to hedge risks in China’s markets as foreign investors expand their holdings. Beijing is also tightening control of private enterprises ranging from the education to the technology sectors at the same time as political tension is on the rise with the West.   

Regulators have relaxed the Qualified Foreign Institutional Investors program — a key channel for global funds to buy China assets multiple times in recent years. In 2019, it scrapped investment limits on stocks and bonds, meaning global funds no longer need approvals to purchase quotas to buy such assets.

Last year, CSRC said it planned to expand the derivatives market by letting foreigners use financial futures, commodity futures and options, without giving a time frame. 

CSRC said the move will attract more foreign capital and pledged to open more financial instruments to foreign investors in deepening market reform. Outside investors will be allowed to use index options only to hedge their positions, the CSRC said.

The announcement came as the bourse in Hong Kong on Monday started offering trading of A share index futures contracts, allowing for better hedging of key Chinese mainland stocks that can be traded via a link to markets in Shanghai and Shenzhen.  

— With assistance by Charlie Zhu, and Evelyn Yu