In order to implement the decisions of the 19th CPC National Congress on full opening-up and support the efficient launch of a pilot project on "full circulation" of H-shares, with approval from the China Securities Regulatory Commission (CSRC), China Securities Depository and Clearing Corporation Limited (CSDC) and the Shenzhen Stock Exchange (SZSE) jointly issued on April 20 the Implementation Rules for the Pilot Project on “Full Circulation” of H-Shares (Trial) (hereinafter referred to as Implementation Rules), which shall become effective as of the same day.
The "full circulation" of H-shares refers to an arrangement that allows the shareholders of a foreign (mainly Hong Kong) listed company to buy and sell in overseas markets through CSDC their shares, which are originally registered in domestic China and cannot be circulated overseas, only after transferring the share registration to the overseas market. At the outset of the pilot project, share lessening by investors will be realized first. The pilot aims at accelerating the capital market reform and opening up in the new era and deepening the reform of overseas listing system. It will further optimize the overseas financing channels for domestic enterprises. And it will be of great significance to support Hong Kong's integration into the overall development of the country and promote the stability of Hong Kong's financial market.
Fundamental to govern the registration and management of H-share "full-circulation" pilot registration and transaction settlement business, the Implementation Rules consists of nine chapters, totaling 46 articles, namely, general rules, account arrangements, cross-border transfer registration, depository and holding record-keeping and maintenance, transaction entrustment and order transfer, clearing settlements, nominal holder services, risk management and attachments. In terms of the registration and custody of shares, the pilot shares are registered, in the overseas market, in the Hong Kong Settlement Account System in the name of CSDC after undergoing the cross-border transfer registration and will be, in the domestic market, carried over and maintained in details through the special account for H-shares "full circulation". With regard to transaction and settlement, investors place a sell order of relevant shares through domestic securities companies to reduce the holding of the pilot shares on the Hong Kong Stock Exchange. The resulting Hong Kong dollars are then transferred to a designated account opened in accordance with foreign exchange management requirements.
Next, CSDC will, in accordance with the overarching guidance of the CSRC, publish the H-shares "Full Circulation" Pilot Business Guide within the framework of the Implementing Rules, and work with SZSE to provide guidance to relevant players in order to push forward the pilot project in a steady and orderly manner, protect legitimate rights and interests of relevant shareholders, and ensure the smooth and steady running of the pilot.
