Zhou Xiaochuan is chairman of the
China
Securities Regulatory Commission and a member of the 16th
Central Committee of the Communist Party of China. In a recent
interview with Xinhua News Agency, he commented on the significance
of Jiang's report to the 16th Party Congress outlining two key
goals for capital investment in China.
The first of these goals has arisen from WTO negotiations. The
financial services sector is to be further opened up to foreign
companies. This will impact on organizations operating in the
fields of securities and fund management and those that offer
financial advice on a consultancy basis. Newcomers would find it
easier to enter the market in China and the expansion of existing
players would be facilitated.
The second goal involves bringing in the capital transfer
mechanisms necessary to finally achieve a fully convertible
currency. This would impact on the B-share market, and see the
listing of domestic companies in foreign stock markets and the
introduction of a Qualified Foreign Institutional Investor scheme.
The Chinese currency has been fully convertible in the "current
account" ie for its use in international trade, since late 1996.
This new goal would see it also become convertible in the "capital
account" ie for purposes of capital investment.
Zhou described the basic strategy outlined in the report as being
to promote opening-up coupled with sustainable development through
facilitating movements of investment capital.
The report to the 16th Party Congress calls for measures to be
brought in to take advantage of both medium and long-term inward
investment. Though the means by which this is to be achieved is not
specified in this particular report, indications have already been
given elsewhere. Reports to both the 5th Session of the 15th
Central Commission of the Chinese Communist Party and the 4th
Session of the 9th National People's Congress have spoken in terms
of "mergers, acquisitions, investment funds and stock market
activity all being explored as vehicles for attracting medium and
long-term inward foreign investment."
Recently, the China Securities Regulatory Commission, the Ministry
of Finance and the State Economic and Trade Commission jointly
promulgated a Notice on Issues Concerning the Transfer of State and
Corporate Shares of Listed Companies to Foreign Investors. This
will enable foreign investors to make capital investments in
Chinese companies via mergers and acquisitions.
The Qualified Foreign Institutional Investor scheme will operate in
parallel as an initiative to attract foreign capital via both
investment funds and direct stock market investment.
The Party Congress report visualizes China growing its capital
investment from both domestic and international sources. The rapid
and sustained economic growth already evident coupled with China's
huge market potential is sure to attract the attention of investors
worldwide.
The service sector is a component of particular interest in the
opening-up of the investment sector. It came in for special
consideration at a working conference held at the beginning of this
year. Leading Party officials pointed out that compared with
opening-up elsewhere it would be prudent to adopt a rather more
measured approach in the service sector. The financial services
industry especially should first be strengthened through further
efforts to enhance the competitiveness of the domestic industry and
attract further fresh talent.
It
seems inevitable that as the service sector is opened-up, new
challenges will come hand in hand with opportunities. But Zhou
points out that as China's economy continues to improve, it is
becoming increasingly resilient in the face of such challenges. The
financial services sector is poised for rapid growth founded on the
availability of well-educated professionals in the industry.
Zhou sees the improvements in China's economy working together with
regulation to create the ideal conditions for optimizing the supply
of new investment capital. This augurs well for continuing economic
development.
(China.org.cn by Tang Fuchun, December 3, 2002)