China allows foreign stock exchanges to establish offices

China has given the green light to the establishment of representative offices of foreign stock exchanges in the country, provided they satisfy and adhere to a slew of conditions.

To be eligible, the stock exchanges should be in operation for over 20 years and have fine financial records, according to the new rules that will come into effect on July one.

Meanwhile, their home country should have signed memorandum of understanding on supervision cooperation with the China Securities Regulatory Commission (CSRC), the securities watchdog of China.

The representative offices can only do non-operating activities including liaison, promotion and research, the rules stated.

Violators will face warning, confiscation of all illegal earnings, or even closure.

The offices are also required to report to the CSRC their large-scale promotion plans targeted at local businesses and can go ahead only if they get no rejection from the securities regulator 10 days after the reporting.

The rules also ordered the offices to submit written reports to the CSRC 10 days after they give severe penalties to the companies listed on their stock exchanges.

No less than half of the staff at the office should be Chinese, the rules say.

The rules also apply to the stock exchanges in Hong Kong, Macao and Taiwan.

Despite the tough entry regulations, analysts say the move is expected to facilitate the listing of more Chinese companies abroad.

"It represents a milestone for overseas stock exchanges in attracting local companies for listing," a senior analyst with CITIC Securities, Cheng Weiqing said.