A lot can happen in a month in China — or at least in its markets. In the past four weeks, its banking regulator has launched a “regulatory windstorm” while the central bank has made the first move to ease capital controls, providing much needed liquidity to the offshore renminbi market.
Meanwhile, BlackRock has for the first time publicly backed the inclusion of onshore stocks in MSCI’s indices, and Chinese officials have even criticised dividend-dodging companies, dubbed “iron cockerels”, and promised extra scrutiny. Some, it noted, have not paid out a penny in 20-plus years of listed existence.
With a very optimistic squint, one might read the collected actions as signs of an investor-friendly, western-style package of reforms. That would be misleading. But they do represent the ongoing process of developing China’s markets and linking them to the international system — one small tweak or reform at a time. For international investors, the easing of capital controls is the most eye-catching change, reflecting their ability to withdraw funds invested — a key concern cited last year by MSCI when it decided A-shares were not yet fit for inclusion.