China Aiming for Shanghai-London Trading Link This Year

China is aiming to start a stock trading tie-up between Shanghai and London this year, according to a top official, creating a system that would give investors in the world’s most populous country direct access to shares listed in the U.K.

China Aiming for Shanghai-London Trading Link This Year

Photographer: Qilai Shen/Bloomberg

The timing was announced by People’s Bank of China Governor Yi Gang at a panel discussion during the Boao Forum for Asia on Wednesday, unveiled as part of a broader package of policies that will further open up the nation’s financial sector. The program with London Stock Exchange Group Plc would be the third system to give foreigners access to the mainland equity market, the world’s second biggest by value. A link between Shanghai and Hong Kong started in November 2014, and a connect between the former British colony and Shenzhen’s bourse opened in December 2016.

An agreement for some sort of connection between London and Shanghai exchanges has been in the works since at least September 2015, when plans were disclosed during a visit to China by then-U.K. Chancellor of the Exchequer George Osborne. In November 2016, LSE and the Shanghai bourse agreed to “develop rules and implementation arrangements.”

The link’s importance is symbolic, as U.K. investors already have access to mainland shares through the Hong Kong links and Chinese traders can use offshore subsidiaries of domestic brokerages to buy stocks in London, said Huang Dongsheng, Shanghai-based head of research at Weifang Fund, which manages more than 4 billion yuan ($637 million). But, he said, “the program signifies that China’s deepening its opening-up effort and its push to make the yuan a global currency.”

While details of the program are yet to be revealed, Xavier Rolet, former chief executive officer of LSE, said in a November 2016 interview with the South China Morning Post that the link to London “would be completely different from the stock connect between Hong Kong and Shanghai.” The system would be a “new concept of stock connect” that would allow Chinese investors to trade stocks listed in London outside of U.K. trading hours, he said.

Quota Increases