China’s State Council plans to revive a policy that will allow mainland firms to freely convert nonlisted “domestic shares” into “H-shares” traded on the Hong Kong stock exchange, sources told Caixin. Full convertibility of nonlisted shares allows founders or major shareholders of mainland firms to float their shares on the Hong Kong bourse, where non-Chinese investors can buy them without being qualified investors on the Chinese mainland. For now, all conversions need the approval of both the China Securities Regulatory Commission and Hong Kong Exchanges and Clearing Ltd, which runs the Hong Kong exchange. The policy is seen as another example of China’s loosening its grip on its financial markets. Caixin has learned that the State Council will select two mainland firms to participate in a pilot program for the full convertibility of H-shares. A senior executive from the Hong Kong stock exchange said that the policy is likely to be pushed forward after the 19th National Party Congress ended.
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