Shanghai-London Stock Connect expands China-UK financial cooperation
Chen Tong

Cooperation between China and the United Kingdom was a hot topic at the Lujiazui Forum, especially given plans to launch the much-discussed Shanghai-London Stock Connect since 2015.

After years of preparations, the basic trading mechanism has been set and the trading rules have been confirmed. The connection will use global depository receipts, which will allow companies and investors on each side to trade on the other's market.

David Schwimmer, the CEO of the London Stock Exchange, said its connection to the Shanghai market is expected to launch soon. He noted that Shanghai listed companies also can issue GDR on London Stock Exchange through Shanghai-London Stock Connect.

“In fact, in the GDR format, the Chinese companies are able to raise capital on London Stock Exchange. So this is the first time where Chinese A share companies can raise international capital through an instrument that is fundable with A shares,” he commented.

Domestic brokerage Huatai Securities has announced to launch the nation's first GDR, allowing listings on the London Stock Exchange. Shanghai Advanced Institute of Finance professor Yan Hong said he is optimistic about the future implementation of the new connect, since the A-share market already has extensive experience in trading with other stock markets.

What is hard to ignore is possible political challenges in the UK's financial markets. Teresa May's departure and Britain's exit from the European Union have raised uncertainty in the country's economic development. But experts said the cooperation between China and the United Kingdom will strengthen in the future in terms of the upcoming Shanghai-London Stock Connect.

“To a certain extent, we had to ignore or not do much work in the area of international cooperation. Meanwhile, all of the potential candidates that do take over in London are all very keen in enhancing international trading especially with Asia,” said Mark Yeandle, director of Z/Yen partners.

The London side has emphasized at the Lujiazui forum that the new connect should be a great opportunity for expanded financial cooperation between the two countries.