China has proposed new rules to govern the Shanghai-London stock exchange link currently under preparation, Bloomberg reports, with Beijing’s policies on capital controls featuring heavily in the guidelines.
Companies using the link, whereby equity will be traded between the two stock exchanges in the form of depositary receipts, will be subject to limits and minimum security values, said the China Securities Regulatory Commission.
China is keen to balance the opening up of its slumping financial markets to foreign investment with cross-border capital controls that manage the country’s currency value.
Under the latest rules to be published, there will be a six-month latency period during which investors will be restricted from swapping London-listed depositary receipts for stock. The option for companies to use depositary receipts to raise new capital will also only exist for Chinese companies, whereas UK companies must use existing stock.