A trading partnership between the London Stock Exchange (LSE) and the Shanghai Stock Exchange could go ahead as soon as this year, according to China's top banker.
Yi Gang, the governor of the People’s Bank of China, said at the Boao Forum for Asia today that the London-Shanghai Stock Connect programme would aim to launch in 2018.
It would allow UK investors access to China's market, and Chinese investors to directly access London-listed companies.
“Linking one of the world’s largest capital markets with one of the world’s most international financial centres is good news for the UK, China and the wider global economy," said Nikhil Rathi, chief executive of the LSE Group's stock exchange unit.
“This is another example of London’s enduring ability to be at the forefront of global financial innovation as UK markets continue to play an important role in supporting investment and innovation around the world."
Though much of the partnership is symbolic, since UK investors can access Chinese stocks through Hong Kong and Chinese investors can buy stocks in London through offshore subsidiaries of domestic brokerages, some substantive changes will occur.
The two-way depositary receipt programme will be the first time international investors can access China A-shares from outside Greater China, and through international trading and settlement practices.
Yi Gang announced the proposals as part of a wider plan to open up the country's financial markets. He also removed certain restrictions on foreign ownership in banks, raised the cap of foreign ownership to 51 per cent in brokerage, fund management future and life insurance business, and expanded the daily quota of Stock Connect scheme by four times.
"We see China's opening up gathering momentum in 2018 (its 40th anniversary of reform and opening up), likely as part of China's response to rising trade frictions," said UBS analysts in a note.