China eases restrictions to encourage foreign entry into the economy

China is considering easing rules limiting foreign ownership in listed domestic companies as it seeks to attract global funds back to its $9.4 trillion stock market.

Authorities are working on policy changes to increase foreign ownership of stocks listed in Shanghai, Shenzhen and Beijing as part of an effort to further open the market and boost trading, people familiar with the matter told Bloomberg.

STEPS TO INCREASE INVESTOR CONFIDENCE

China currently limits total foreign ownership in publicly traded companies to 30 percent and subjects a single foreign shareholder to a 10 percent limit.

Among a package of measures aimed at appeasing investors in recent weeks, Chinese authorities have reduced transaction fees for stock transactions and stamp duty.

Additionally, the Chinese Communist Party promised to “revitalize capital markets and increase investor confidence” at the July Politburo meeting.

FOREIGN OUTWAY IS HITTING THE CHINESE ECONOMY

It is believed that the negative consequences of the outflow of foreign exchange for the Chinese economy were effective to the extent of the Chinese government. Global investors continue to flee the country amid concerns ranging from China’s ongoing real estate crisis to worsening relations with the United States.

As the outflow of foreign funds from the world’s second-largest stock market continues, Chinese companies have been among the worst performers globally this year.

Foreign investors sold a record $12 billion of Type A shares last month, while China stocks fell nearly 17 percent from the December 2021 peak to the end of June 2023, suffering a loss of $1. .37 trillion yuan ($187.5 billion).