Foreign strategic investors are now allowed to buy China's tradable A-shares in addition to buying through the Qualified Foreign Institutional Investors (QFIIs) system.

A joint announcement issued late last Friday by the Ministry of Commerce and China Securities Regulatory Commission (CSRC) requires foreign investors to hold a certain percentage of A shares within a certain lock-up period.

The announcement said the two authorities would work out details for this new issue method shortly.

The new rule also said that when a listed company with foreign stakes joined the share reform, the company can still enjoy favourable policies as a "foreign-invested enterprise" as long as foreign investors keep at least 10 per cent of the company's stakes after selling its former non-tradable shares.

China's stock market is now engaged in a fundamental structure reform to convert two-thirds of its state-owned non-tradable shares to tradable ones. Approximately 186 domestically listed companies, whose shares account for about 20 percent of the market value, have undergone or are currently undergoing reform.

When converting non-tradable shares to tradable ones, the controlling shareholders must ensure they do not float their shares within a certain time period and sell them bit-by-bit in the future, in order to prevent a flood in the market and investor anxiety.

The newly-floated former non-tradable shares are expected to reach about 200 billion yuan (25 billion US dollars) next year, much higher than the initial public offerings in a single year in China, China Daily quoted Dong Chen, a research department manager at CITIC Jianyin Securities.

Some domestic institutions and retail investors were conservative despite government encouragement, while foreign strategic investors, who were inspired by China's rapid economic growth, showed much interest on China's stock market, said the manager.

Providing more chances for foreign investors to invest in China's equity market will enrich the capital sources and help boost the market, he said.

Source: Xinhua