The new rules were issued to maintain the normal order of the B-share market and foreign exchange market, protect the legal rights and interests of investors and regulate the behavior of market participants, the article said. If the B-share market soars when it reopens, only those who entered the market through illicit means will profit. Xiaoyang, an analyst with Pingan Securities State media also set out the key rules that will govern Chinese investment in the B-share market, which was previously reserved for foreign investors only.
Chinese investors can only use hard currency on deposits at banks to trade B shares.
Foreign exchange savings included cash deposits and remittances from overseas. Domestic investors will also be prevented from withdrawing hard currencies from B-share fund accounts or sending money out of the country, although the transfer of funds to a commercial bank account will be allowed. However, according to the Dow Jones Newswires, investors are not prevented from obtaining hard currency on the black market, depositing it into a bank account and then transferring it into a B-share capital account. Instead of distinguishing between legal and illegal foreign exchange, the rules allow both types of money into the B-share market, Dow Jones noted. Another expert warns of risks Some financial insiders believe that opening the B-share market to domestic investors will greatly challenge the exchange rate of the renminbi because it will create a huge need for foreign currencies.