what does financial opening up mean to china?
the financial opening up has three main components. first，the liberalization of the local currency，which is the minimum threshold and foundation of a country’s financial opening. so far，the rmb liberalization reform is still in progress，in other words，the rmb is not yet a fully convertible currency. the rising share of the rmb in the special drawing rights (sdr) from 10.92% to 12.28% does not equal to a share of 12.28% in the international market，because the rmb has not been liberalized in essence.
second，the internationalization of institutions. china is ahead of the curve on this point，with the maximum relaxation for foreign commercial banks，insurance companies，securities companies and other financial institutions to set up independent legal persons and branches in china. the pace of reform in this area is relatively fast.
third，the all-around opening up of the financial market，which means investors，can invest freely in the chinese market under chinese laws，that is，free capital inflow and outflow. at present，the opening of china’s capital market is exploratory，and can be characterized as “pipeline” opening，including the qualified foreign institutional investor (qfii)，rmb qualified foreign institutional investor (rqfii)，shenzhen-hong kong stock connect，and shanghai-hong kong stock connect to open the capital market to the outside world. this type of opening，however，is very limited，evidenced by the low proportion of foreign investors of about 4.5% now，even after the removal of quota restrictions on the shenzhen-hong kong stock connect，shanghai-hong kong stock connect，and qfii. obviously，we cannot consider it a fully open market. foreign investors as a percentage of china’s financial market，especially the capital market，is comparatively low among major economies in the world.
these are the three components of financial opening from my point of view. among them，the opening of financial institutions has progressed quickly，with the internationalization of financial institutions basically completed，while the liberalization of the rmb and the all-around opening up of the capital market are still in the exploration stage.
