Member of the National Committee of the Chinese People's Political Consultative Conference and Chairman of Guotai Junan International Holdings Limited, Yan Feng: Appropriately and gradually lowering the access threshold for qualified investors in Hong Kong Stock Connect

In recent years, global geopolitical tensions have persisted, and the economic and financial landscape has undergone rapid changes. It has become a market consensus that the attractiveness of U.S. dollar assets has relatively weakened, further prompting global capital to seek new “safe havens.” Chinese assets, supported by the country’s strong economic resilience and breakthroughs in new productive forces, have become a strong option for rebalancing global capital.

Against this backdrop, Yan Feng, member of the National Committee of the Chinese People’s Political Consultative Conference and Chairman of Guotai Junan International Holdings Limited, suggested at this year’s National People’s Congress that promoting rapid development of the capital market and maintaining market stability should be two key priorities. He emphasized seizing the opportunities brought by global governance reforms, “Invest in China” and “Chinese investment” opportunities, deepening the connectivity between the mainland and Hong Kong markets, and achieving stability through openness, development, and reform.

Yan Feng believes that leveraging Hong Kong’s unique advantages is crucial for achieving these goals. A more vibrant and stable Hong Kong market will significantly enhance international investors’ confidence and willingness to allocate Chinese assets through connectivity channels, thereby forming a new pattern of mutual support between the two regions, with mutual promotion of domestic and international markets and balanced, two-way development.

Looking ahead to 2025, the supporting role of Hong Kong stocks for A-shares is gradually becoming evident. In the Hong Kong market, the Hang Seng Index and the Hang Seng Tech Index have increased by 27.8% and 23.5%, respectively; the total funds raised through IPOs reached HKD 285.8 billion, returning to the top globally. In addition to active secondary market trading, the average daily transaction volume in the spot market reached HKD 249.8 billion, an 89.5% year-on-year increase. Leading Chinese-funded securities firms in Hong Kong have seen significant growth in core business revenues. On the A-share side, the Shanghai Composite Index and the STAR 50 Index have risen by 18.4% and 35.9%, respectively; the total market capitalization has surpassed 100 trillion yuan, and the average daily trading volume of the two markets reached RMB 1.7 trillion, a 61.9% increase year-on-year. The new pattern of two-way development between Hong Kong and A-shares is beginning to take shape.

Therefore, it is essential to continue consolidating this positive momentum, further explore the potential for coordinated development between the two markets, optimize relevant mechanisms, and enhance the ability and attractiveness of both markets to absorb international liquidity. Through the bidirectional flow of incremental funds between the north and south, support and promote the mutual development of the two stock markets.

To this end, Yan Feng proposed four specific suggestions:

1. Leverage “Chinese investment” to strengthen the market foundation. It is recommended to gradually and prudently lower the access thresholds for Hong Kong Stock Connect qualified investors, ensuring the closed-loop operation of funds and compliance with foreign exchange management requirements, and to expand the QDII (Qualified Domestic Institutional Investor) and RQDII (Renminbi Qualified Domestic Institutional Investor) mechanisms to individual clients. This can enhance the influence of “Chinese investment,” alleviate the premium and discount issues between H-shares and A-shares, boost market valuations, promote household savings into investments, and increase residents’ property income, thereby releasing domestic demand potential.

2. Highlight the theme of “Invest in China” to attract global capital. Under controlled risk conditions, improve the convenience for overseas investors to participate in the mainland market, promote better alignment of trading rules and risk hedging mechanisms with international standards, and further integrate Chinese assets into major international indices such as MSCI and FTSE Russell. Actively tell China’s story to enhance the international market’s understanding of China’s economic prospects and investment opportunities.

3. Deepen reforms of the market maker system to improve market liquidity and efficiency. Address issues such as insufficient market-making functions in the mainland and lack of liquidity in small- and mid-cap Hong Kong stocks by systematically optimizing the Shanghai and Shenzhen market-making mechanisms and exploring the introduction of a market maker system in Hong Kong stocks. This will strengthen liquidity support, stabilize market valuations and expectations, and have positive implications for restoring market wealth effects, stabilizing consumption, and stabilizing the economy.

4. Improve risk prevention and control systems to prevent systemic risks. Continue strengthening monitoring and prevention of high-risk areas such as on- and off-market leverage, algorithmic trading, high-frequency trading, and cross-border arbitrage. Increase oversight of illegal private placements and disguised leverage, ensuring market leverage remains within safe limits. Additionally, establish a quantitative trading circuit breaker mechanism to prevent market irrational fluctuations caused by algorithmic resonance. Suppress excessive speculation and capital idle, preventing the capital market from deviating from economic fundamentals and losing order.

(Securities Times Reporter: Sun Xiangfeng)

(Edited by: Wen Jing)