Chinese Think Tank Warns about Shanghai-Hong Kong Stock Connect

A ministry-level think tank, the Chinese Development Research Center has outlined some risks related to the launch of the Shanghai-Hong

hong_kong-shanghai_connectThe Chinese press is reporting that according to Zhang Chenghui, a financial researcher with the Chinese Development Research Center, there are substantial “risks” related to launching the Shanghai-Hong Kong Stock Connect because of the different trading systems used by both markets.

Mrs. Chenghui underlined that the two markets are underpinned by different trading systems. She provided no signal as to when the mutual market access program would be launched, explaining that the decision is up to the China Securities Regulatory Commission and the State Council.

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The Development Research Center (DRC) of the State Council is gathering professional economic information and leveraging its powerful lineup of experts to provide expertise on important economic issues. In April last year, President Xi Jinping outlined a proposal to continue developing new think tanks with Chinese characteristics, suggesting that they might play an even more important role in the government’s decisions.

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Mrs. Zhang Chenghui has been leading the DRC’s efforts related to the over-the-counter markets.
She has also taken the leading role in project research, including supervision, control and management research of the Chinese currency market.

The announcement hit the wires just a couple of weeks after the Hong Kong’s Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) announced the signing of a Memorandum of Understanding (MoU) which aims to launch a pilot program for the establishment of mutual access between the Shanghai and the Hong Kong stock markets.

Recently, technology company Dion Global launched a new module within its NOVA suite to support the Shanghai-Hong Kong Stock Connect.

According to the firm it was designed to address the key differences between the two exchanges, including the process changes required to handle multiple market execution feeds and the difference in trade processing times. However, this latest opinion by the DRC could result in some delays to the project as the regulators get more deeply involved in assessing the risks arising from the different trading systems used.

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