Feng Jiang, President, Shanghai Stock Exchange (SSE) recently took part in the WFE’s Fostering Growth in Global Capital Markets symposium in Shanghai. This Q&A focuses on his viewpoints on building Shanghai as an international finance centre.
The first panel at the event was focused on how to build Shanghai as an international financial centre. What would you say are the key drivers in achieving this vision, and why is it an important part of the continuing success of China and its capital market?
Building Shanghai International Financial Centre is one of the most profound measures to serve China’s reform and opening-up. The Shanghai Stock Exchange (the SSE) plays a pivotal role in the establishment of Shanghai International Financial Centre. As one of the main factor markets in Shanghai, we have contributed to the establishment of the Financial Centre by advancing the opening-up of the capital market and accelerating the pace of internationalisation.
Since its inception, the SSE has dedicated its efforts to globalise the market. The SSE opened the B-share market in 1992, launched the trading through QFII in 2003 and through RQFII in 2011 for overseas investors, and implemented the Shanghai-Hong Kong Stock Connect Scheme in 2014. The Stock Connect accelerated the internationalisation of the exchange. In an effort to share our experience for internationalisation, we would like to review the success of the Shanghai-Hong Kong Stock Connect as follows:
(1) Home-market rules shall prevail. The exchange market should be open, fair, and just, throughout the process of opening-up. Consistent trading rules and regulatory measures shall be put in place for both domestic and overseas investors. Currently, regulatory authorities and exchanges are working together to introduce an ID system for northbound investors through the Stock Connect, so as to implement the look-through supervision in a multi-tiered account environment in overseas markets.
(2) Appropriate institutional arrangements shall be made to harmonise the differences between domestic and overseas markets. The introduction of the nominee account successfully resolves the account differences between Mainland and Hong Kong markets.
(3) Controlled gradual opening-up shall be steadily pursued. The scope of eligible shares for the Stock Connect Program was expanded to certain shares from the Shenzhen Stock Exchange, after two years of successful operation of the Shanghai-Hong Kong Stock Connect.
Please can you tell us how your business is helping to foster growth in both global, and Chinese, capital markets?
After 28 years of rapid development, the Shanghai Stock Exchange has grown into a comprehensive, open and service-oriented exchange. To date, the SSE is the first exchange in Mainland China, which offers both cash equities and derivatives products. The exchange offers a wide spectrum of products including stocks, bonds, funds and derivatives; develops world-class trading systems and state-of-the art communications facilities, which contribute to the efficient operation of the Shanghai securities market; and establishes an effective self-regulatory framework regulating listed companies, SSE members and the securities market.
With these advantages, the SSE has become one of the important stock exchanges and most preeminent emerging market in the world. In 2017, the SSE ranked among the top exchanges by stock market capitalisation, trading value and capital raised. The total market cap exceeded US$5 trillion. The average daily turnover reached US$31 billion. The capital raised through equity hit US$118 billion.
Throughout the process, the SSE has made relentless efforts to innovate products to support its globalisation strategy:
• In terms of Panda Bonds, the SSE is the first exchange in Mainland China to have overseas issuers of Panda Bonds. From 2015 to end of May 2018, a total of 53 Panda Bonds have been issued by overseas companies on the SSE with a total amount of approximately US$ 14.3 billion.
• Under the leadership of the China Securities Regulatory Commission (the CSRC), the SSE released Measures for Listing and Trading Depositary Receipts Issued by Pilot Innovative Enterprises on the Shanghai Stock Exchange on June 15 to actively promote the issuance of CDRs by pilot innovative companies.
• Under the guidance of the CSRC, the SSE is steadily making preparations for the Shanghai-London Stock Connect and strives to launch the first batch of products by the end of this year.
On the other hand, the SSE has been committed to becoming an international exchange and facilitating the integration of Chinese capital market with international markets. Staying in close contact with exchanges around the world, the SSE has inked MOUs with 48 overseas exchanges, based on which concrete collaborations have been conducted. The exchange has become increasingly influential in international securities industry organisations. In the capacity of Chairman of the World Federation of Exchanges, the SSE has played a significant role in the development of the global exchange industry. Meanwhile, the exchange is also a member of Asian and Oceanian Stock Exchanges Federation (AOSEF).