Xu Yi Li: What Are The Key Reasons For The Failure Of Shanghai And Hong Kong?

A media report today said that the Asian Securities and financial market association has written to the Hongkong Securities Regulatory Commission for more time to prepare for the opening of Shanghai and Hong Kong.

The position of this important institution is very representative. According to their statement, at least one month notice should be opened. At present, there are still many uncertainties to be cleared up.

What are the obstacles that lie between the two cities in Shanghai and Hong Kong?

The key is capital gains tax. Capital gains actually refer to capital goods, such as stocks, bonds, real estate, land or land use rights. When the sale or paction occurs, the income that is greater than the expenditure is earned, that is, asset appreciation.

Capital gains tax is a tax on capital gains. It is, in other words, a tax on gains from capital gains earned by investors in securities trading.

Strange to say, in the case of capital gains tax, the mainland can say yes or no.

The law has stipulated that foreign equity investors should pay 10% capital gains tax, but the government has never received them.

This actually creates a very large uncontrollable risk for foreign investment institutions.

An important area of capital gains tax impact is QFII, which started from the first order of QFII in 03 years. So far, capital gains tax has always been a sword hanging on the head. It has not been put down. Foreign investors do not know whether they have any, nor do they know when to put it down or how strong it is. Only QFII has to make a provision for itself.

Shanghai and Hong Kong through the same problem.

Shanghai and Hong Kong once opened, the influx of investors is still institutional investors, 10% of capital gains tax is a very large part.

If the agent of a foreign investment is ready to withdraw from cash withdrawals, then the 10% levy will become the key to how much funds the relevant investment institutions should reserve.

Leaving less is liquidity risk. Too much reserve is the loss of capital retention.

Profits tax has long been in a vague state in China's stock market. For Chinese investors, although the personal income tax law stipulates a 20% tax rate, the government has been exempt from the stock market since 1994 to promote the development of the stock market.

However, the capital gains tax of foreign capital is even more obscure, neither to say nor to exempt. For foreign investment, this mode is actually the most uncomfortable.

Although Asian and Pacific emerging market countries are implementing the policy of reduction and exemption on capital gains tax, even if China signs up for foreign investment, it will still be attractive.

It can be seen from the performance of QFII.

In fact, the confusion of tax policy has not stopped foreign investors from increasing A share positions through the QFII mechanism.

The approved QFII quota is now close to $60 billion, compared with about $45 billion a year ago.

QFII, which is entering the market with tax uncertainty, is still in the queue, and China's A share market is still one of the more attractive markets in the world, whether from economic growth or from valuation advantage.

Markets do have attractions.

In addition to tax revenue, it is estimated that there may be some technical details of Shanghai and Hong Kong pass.

Like two.

Technology docking, such as trading, whether the Shanghai stock exchange can see the Hongkong stock exchange and the Hongkong stock exchange through the relevant systems.

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There are some more special situations that need to be considered before opening.

For example, at present, Hong Kong stocks have a limited share of daily pactions.

With share restrictions, what happens if investors issue shares after buying shares? This is likely to exceed the original share.

In another case, for example, to fight new, we all know that the purchase of new shares is an almost secure business in A shares.

But the current share of the new shares to apply for the quota of the old stock.

But if foreign investors hold enough shares in the old stock market, will they have the opportunity to participate in the purchase of new shares? What kind of process should they take? These problems are very special, but it is also necessary for Shanghai and Hong Kong to pass through.

Shanghai and Hong Kong through the opening, the early saying is a Monday in October, at present, it is only 27 days.

The possibility is already very small. As far as the current news factors are concerned, the opening of Shanghai and Hong Kong links is still not a complete preparation, so before opening up, it should still be repeated deliberation and polishing.

From time to time, the opening of November will be a more conservative prediction. The opening of Shanghai and Hong Kong will probably drag on until the end of the year.