China Pulls Plug on Shanghai-London Stock Connect

China Pulls Plug on Shanghai-London Stock Connect

Beijing has reportedly suspended the Shanghai-London Stock Connect scheme due to rising political tensions with London over pro-democracy demonstrations in Hong Kong. 

While no official comment has yet been made by the China Securities Regulatory Commission or the UK Treasury, multiple reports indicate that Beijing’s decision to halt the Shanghai-London market link was guided by political considerations. 

“I’m not aware of the specifics,” China’s foreign ministry spokesperson Geng Shuang told reporters in Beijing yesterday, “I would just like to stress that we hope the UK will provide a fair and just and open, non-discriminatory environment for Chinese businesses to invest there, and we hope it will create fair conditions for practical cooperation between the two countries.”

Britain’s stance on the ongoing civil unrest in Hong Kong has been a source of tension between Beijing and London for several months already. The UK has repeatedly called on the Hong Kong government to show restraint in its treatment of protesters, and has also accused China of torturing a former employee of the British consulate in Hong Kong.

Calls for sanctions and the offer of alternative citizenship to the people of Hong Kong have also caused a strain on China-UK ties, at a time when the British Prime Minister Boris Johnson’s government is hoping to strengthen, not test, ties with the world’s second-largest economy. 

“The behaviour of the Hong Kong Police Force today marks a new low,” declared the British Baroness Bennett, Chair of the Westminster Friends of Hong Kong, in November last year, “the Hong Kong government are complicit because they are refusing to call an independent inquiry. The UK must consider targeted sanctions in response.” 

“It is time for the Foreign Secretary…to speak out and take action,” echoed Lord Alton, an independent Cross-Bench Peer and Patron of HK Watch, “They should urgently issue a statement on the escalation of violence by the police, target the perpetrators of human rights violations with Magnitsky-style sanctions, and consider working with Commonwealth partners to extend a second citizenship to Hongkongers.” 

The Shanghai-London Stock Connect was designed to allow firms listed in one venue to issue shares on the other market. So far, the initiative has already proved less than a resounding success, with just one Chinese company listing in London and no British companies opening on the Shanghai bourse. 

Brokerage Huatai Securities Co. became the first Chinese firm to sell global depositary receipts (GDRs) in London in June 2019, and SDIC Power Holdings Co. halted plans to sell GDRs due to “market conditions.” 

If Beijing really has put a stopper on the Shanghai-London Stock Connect scheme, it could very well be proving a point over support for Hong Kong democracy demonstrations while accepting little actual cost to Chinese markets. 

3 JANUARY 2020 UPDATE: The China Securities Regulatory Commission said the Shanghai-London Stock Connect was operating normally at the time of a regular news briefing in Beijing. 

“Media reports on postponement of Shanghai-London Stock Connect do not match facts,” Chang Depeng, CSRC spokesperson, said at the time.

Joanna Eva is a London-based analyst and contributor with a range of clients in the risk consulting industry. She specializes in Asian political and economic analysis, having lived and travelled extensively in the region for close to a decade. She holds a Master of Law from the University of New South Wales and received her Bachelor of International Studies from the University of Sydney. She is proficient in English and Mandarin Chinese.

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