(Yicai Global) June 21 -- An international index without Chinese A-shares would be at best incomplete, Qi Bin, director of the China Securities Regulatory Commission's International Cooperation Department, said today at Lujiazui Forum 2017.
Inclusion of A-shares in the MSCI index is thus an inevitable trend.
China's A-share market is already the world's second largest capital market, but also the world's largest emerging and fastest growing market, he said. CSRC and other relevant ministries have been working hard to attract long-term institutional investors into China's capital markets over the years, by e.g. improving the foreign exchange administration's remittance of funds in and out of the country, bettering the suspension and resumption trading system by the stock exchanges and CSRC's confirmation of the rights of nominal holders.
"These are not just for international institutional investors, but also for the protection of domestic investors and improvement of market regulation and efficiency. We take the attitude that inclusion by MSCI is natural, since it would be inevitable in the long run and would happen sooner or later, anyway. I would also like to talk about my personal views on international institutional investors. When you want to participate in a market, you'd better not wait too long. It would too late to enter the market after it has become consummated," Qi said.
With or without the inclusion of A-shares in the MSCI this year, the pace of reform and opening will not stop, and the focus will be on how to monitor the market in a more open way, Qi said. Especially after the financial crisis, the links and correlation coefficients between the various financial markets have increased substantially, he added.
Another important aspect is to promote the feasibility study of the Shanghai-London Stock Connect. If the Connect can open, it will provide more direct opportunities for investors of both sides to participate in the other's market, while the study and inauguration of the Shanghai-London Stock Connect will also need the regulators of both side to tighten supervision and cooperation. The CSRC can learn a lot from UK regulators in the process, Qi noted.
Banks and lack of capital market development have long dominated China's financial institutions, he said, and this has always been a problem. The world has experienced nearly 80 economic and financial crises over the past 50 years, a study by two IMF economists shows. Among 17 OECD economies, the top four nations, including the US, UK, Canada and Australia -- which take up the largest proportion in the capital market financial system -- had the fastest recoveries, while the four countries dominated by banks, such as Austria, Spain, and Portugal, had the slowest. This is a very important revelation, i.e. a country's financial structure should be more market-oriented, to have more proportion of capital market in it while at the same time, improving the supervision and efficiency of market operation.