
UK and China Regulators Discuss Framework for Financial Projects
Title: British and Chinese Regulatory Bodies Collaborate on Financial Services Initiatives
By Michelle Price
HONG KONG – British and Chinese securities regulators are in discussions to establish an agreement aimed at facilitating significant financial services projects between the two nations. This collaboration comes amid concerns that the recent decision for Britain to exit the European Union might diminish its attractiveness as a partner for financial deals.
The Financial Conduct Authority (FCA) from the UK and the China Securities Regulatory Commission (CSRC) are working together to create a regulatory framework for distributing fund products across their respective markets. They are also considering a proposed link between London and Shanghai for trading shares, as confirmed by two people with direct knowledge of the matter.
In recent years, Britain has sought to enhance its financial services relationship with China, particularly as the UK is home to the largest finance sector in the EU. China has shown openness to these cross-border financial initiatives through its participation in the UK-China Economic and Financial Dialogue (EFD).
During a meeting last September in Beijing, then-Chancellor George Osborne and Chinese Vice Premier Ma Kai indicated their intent to explore the establishment of a London-Shanghai equity link and a mutual funds recognition scheme, although further details have not been provided by either government.
Despite some complexities arising from the economic ties between the two countries following the EU vote and the changes in British leadership — notably the departure of David Cameron, who had advocated for closer relations with China — the discussions between the FCA and CSRC indicate positive progress for financial projects.
New Prime Minister Theresa May recently intervened to pause a proposed Chinese investment in a British nuclear plant pending a review of security concerns. Vince Cable, who served as business secretary from 2010 to 2015, noted that during Cameron’s time in office, May expressed significant reservations about the approach towards Chinese investments.
Nevertheless, the ongoing cooperation between the FCA and CSRC suggests momentum for the financial initiatives, with one source indicating that discussions have been "very positive."
Some analysts had expressed worry that Britain’s exit from the EU could impact its future access to the trading bloc and the associated rights to offer financial services, potentially hindering these projects. However, Frederic Ponzo, managing partner at financial consultancy GreySpark Partners, stated, "So far none of the cross-border exchange initiatives has been derailed by the risk of Britain leaving the European economic area and the associated passporting rights."
He emphasized that the CSRC and the FCA are expected to continue their collaboration despite the EU vote.
A second source revealed that the regulatory agreement being explored by the FCA and CSRC could resemble a memorandum of understanding previously established between the CSRC and the Hong Kong Securities and Futures Commission before the launch of the Hong Kong-Shanghai stock trading link in November 2014. This earlier agreement provided a governance framework, including the sharing of trading data and coordination on investigations, although it is unclear if a UK-China agreement would be similarly comprehensive.
Potential details regarding the regulatory collaboration could be disclosed at the next EFD meeting this Autumn, though this is not confirmed. Discussions may also encompass cooperation in the area of fintech. However, both sources indicated that no significant new financial services initiatives are anticipated to be announced during this year’s EFD meeting, which is likely to occur in October or November in Britain, as both nations assess the implications of Britain’s EU exit.
The FCA did not comment on the discussions, and the CSRC and UK Treasury also did not respond to inquiries.