15 December 2019
Chinese authorities have hinted at further economic reforms, bolstering hope for a resolution of the trade dispute with the US. Photo: Reuters
Chinese authorities have hinted at further economic reforms, bolstering hope for a resolution of the trade dispute with the US. Photo: Reuters

Lujiazui Forum offers hope for progress in US-China talks

The world will be closely watching the G20 summit that will kick off in Osaka, Japan on June 28. As of now, there is no clarity as to whether Chinese President Xi Jinping will hold talks with his US counterpart Donald Trump on the sidelines of the summit.

However, the words from the Lujiazui Financial Forum and Trump’s recent comments have offered us some positive signs.

At the Lujiazui Forum, Vice-Premier Liu He said he believes “in the near future, China will carry out some strong opening-up measures,” Although the country “is facing some external pressure”, such pressure “could actually speed up China’s pace of reform,” the official said.

The remarks have fueled speculation that a Xi-Trump meeting in Osaka is likely and that some progress in the trade talks is possible.

And Beijing might be ready to introduce more opening-up measures soon after the summit.

Meanwhile, Trump said recently that “I have a feeling that we’re going to make a deal with China”. He also said there is no deadline on the plan to impose 25 percent tariff on and additional US$325 billion of imported goods from China.

It seems Beijing and Washington will be able to reach some consensus at the G20 summit.

Meanwhile, a few other prominent speakers at the Lujiazui Forum also brought important messages for the financial market last week.

Huang Hongyuan, chairman of the Shanghai Stock Exchange, revealed at the event in Shanghai that the first batch of companies will list on the new tech board within two months.

Data shows that 122 companies have already filed listing applications on the new Shanghai tech board, with their businesses spanning biotech, information technology, new materials, new energy, high-end equipment manufacturing, energy conservation and environmental protection sectors.

It’s estimated that 20 companies will debut on the new board in the first round of approval.

The much-hyped new tech board is the pet project of President Xi. He announced in November last year that China will set up a new tech board to support innovation.

Another critical development is that China will properly ease and even cancel quota management for Qualified Foreign Institutional Investors (QFII) and RMB Qualified Foreign Institutional Investors(RQFII), in order to expand the investment scope for foreign investors, according to Pan Gongsheng, head of the State Administration of Foreign Exchange (SAFE).

Currently, foreign investors need to apply for quota to invest in the Chinese domestic market. And the quota is renewed on a yearly basis. Leading foreign institutional investors such as the Hong Kong Monetary Authority and Singapore sovereign wealth fund Temasek Holdings typically get quotas of US$1 billion to US$3 billion.

The approval system for QFII and RQFII quota is aimed at preventing excessive turbulence due to buying and selling activities of foreign investors.

This is the first time Chinese authorities have revealed plans to remove the quota system, a sign that Beijing is only longer that worried about being overwhelmed by capital flows of foreign players.

Such confidence likely stems from the much larger size and depth of China’s financial market after years of growth.

This article appeared in the Hong Kong Economic Journal on June 14

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist