China's A-share market. Photo: AFP
The capital market plays an important role in resources allocation, asset pricing and mitigating risks. Photo: AFP

Beijing has constantly pledged to open up its financial markets. On Tuesday, China’s State Administration of Foreign Exchange tentatively dipped a big toe into the ‘waters of reform.’

While short on detail, the aptly named SAFE issued an online statement and referred to “creating a fairer, more transparent and convenient business environment.”

This, in turn, will deepen “foreign exchange management reform” and open up the forex sector. Promises like these have been made before but this time it could be different.

The decision to press ahead with plans for overhauling the industry and allowing greater access to foreign players came after a meeting with the United States Chamber of Commerce, as well as global companies such as Citibank, Deloitte & Touche and Samsung.

Again, while facts were sparse, SAFE made it crystal clear that China would “steadily push forward capital account convertibility” and fend off cross-border capital “flow risks.”

Last month, President Xi Jinping’s administration gave the green light for the London-Shanghai Stock Connect to start operations later this year. First mooted in 2015, the link will allow companies from China to sell global depository receipts in the United Kingdom and London-traded firms to list similar securities in Shanghai.

“This is a real step in the integration of China’s financial markets,” Karine Hirn, a partner at East Capital Asset Management in Hong Kong, told Bloomberg news agency at the time.

“What’s exciting about this project is that it’s Chinese money going into Western companies,” she added.

Just weeks later, the country’s leading home appliances manufacturer Haier revealed it was planning a D-share listing in Frankfurt on the China Europe International Exchange or CEIE, a joint venture between the Shanghai Stock Exchange, Deutsche Borse and the China Financial Futures Exchange.

Since its launch in 2015, CEIE has struggled to attract investors, but the move by Haier could pave the way for other leading Chinese companies to raise funds from overseas investors in Frankfurt.

“We hope that the market will turn into an overseas platform for renminbi-denominated assets,” Chen Zhiyong, executive director at CEIE, said, adding that it would “serve as a bridge between Chinese and German manufacturing companies for business partnerships.”

Still, Tuesday’s decision by SAFE followed concerted pressure from the United States and the European Union to further open up the financial sector to foreign competition.

It also came after a pledge in April by People’s Bank of China Governor Yi Gang to put in motion a raft of reforms in the financial industry, which were proposed last year.

“The greater detail on the timing of implementation may indicate China’s desire to avoid an escalation in trade restrictions,” Moody’s, one of three major credit-rating agencies, pointed out in a note after Yi’s announcement.

Maybe, this time, Beijing has finally found a remedy for what the EU Chamber of Commerce in China has labeled “promise fatigue.”