Pursue Higher-level Opening up and Build a Modern Capital Market with Chinese Characteristics – Vice Chairman FangXinghai’s Speech at the 2023 Global Investor Conference of SZSE

Dear Vice Governor Zhang Xin and Standing Committee member Zeng Pai,

Leaders, guests, ladies and gentlemen,

Good morning!

Iam very pleased to attend the Global Investor Conference hosted by SZSE. First, on behalf of CSRC, I'd like to express our warm congratulations on the holding of the Conference, our warm welcome to both the guests at home and abroad, and our sincere thanks to international investors and financial institutions who have long supported and actively participated in the development of the capital market of China.

The20thCPC National Congress requires us to advance the great rejuvenation of the Chinese nation on all fronts through Chinese modernization. Building a modern capital market with Chinese characteristics is an integral part of advancing Chinese modernization. A modern capital market should be one that opens in both directions, welcoming global investors with open arms and effectively assisting local enterprises in going international. During a recent inspection visit to Guangdong, General Secretary Xi Jinping required us to firmly deepen reform in all respects and expand high-standard opening up and asked Guangdong to take the lead in advancing Chinese modernization. SZSE has long dedicated itself to the building of an open market. This year's Global Investor Conference, themed "New Investment Opportunities in the Modern Capital Market with Chinese Characteristics",is highly relevant under the current circumstances. Here, I would like to take this opportunity to share some of our practices in pursuing higher-standard opening up of the Chinese capital market.

We focus on the deepening of reform of the capital market and optimization ofpolicies and regulations to provide a sound investment environment for international investors. In April, the main boards of SSE and SZSE saw the listing of their first registration-based IPOs, marking the full implementation of the registration-based IPO reform in China. Built upon the registration-based IPO reform, we deepened the reform and opening up of the capital market in all respects, and advanced the establishment of basic policies and regulations of the capital market, the refinement of the rule of law system, regulatory transition and capability improvement in a well-coordinated manner. Those efforts effectively facilitated investment and financing and provided a more convenient and friendlier environment for overseas institutions to participate in the Chinese capital market. In 2022, 428 new companies debuted on the A-share market, maintaining the regular issuance in the market and providing new investment targets for investors. Sources of medium- and long-term funds of the capital market were further expanded, the professional investors such as publicly offered funds steadilybuilt up strength, and the personal pension investment public fundswas officially launched. The shareholding ratio and proportion of transactionsby domestic and foreign professional institutional investors continuously increased, while the proportion of transactions byindividual investors decreased from the long-standing over 80% to around 60%. In 2022, the shareholding ratio of domestic professional institutional investors at SZSE was around 21%, and their transaction proportion 31%, which rose 5.5 percentage points and 18 percentage points in five years respectively.

We continued to give play to the functions of the capital market. The depth and breadth of the market have reflected the opportunities in China as a large market. With the implementation of the registration-based IPO system, the number of A-share listed companies has grown significantly to over 5,000, with a market capitalization of more than CNY 85 trillion. Bonds, funds, REITs, indices, futures and derivatives markets have maintained steadyand fast growth and provided one-stop diversified investment options to global investors. Thanks to the continuous expansion of the Chinese economy, the Chinese capital market has improved in quality and became the world's second largest market, with the largest number of and the most active investors in the world. Boasting 260 million investor accounts, SZSE ranks 3rd among global securities exchanges in terms of stock turnover. Besides, China is not in the same economic cycle as overseas markets and Chinese assets are relevant to but different from other markets' assets. All those have demonstrated the investment value of Chinese assets among global asset portfolios.

We helped form a group of quality listed companies that reflects the high-quality development requirement. A-share listed companies, as the fundamental of the national economy, maintained resilient growth in performance on the whole. In 2022, they realized operating income of CNY 71.53 trillion, up 7.2% year on year, and their average R&D intensity was 2.32%, up 0.25 percentage point year on year. Listed technology companies were characterized by high growth and high R&D input. The operating income of listed companies from the high-tech manufacturing industry increased by 14.6% and their R&D intensity recorded 6.71%. A fleet of listed companies have grown into companies with the most advanced technology or the largest scale in the world in the fields of clean energy, electric vehicles, etc. Besides, more and more A-share listed companies are actively embracing the green development philosophy. More than 1,700 companies, with a significant increase year on year, prepared and released a separate ESG report in 2022 to better meet international investors' ESG investment needs.

We expanded high-standard institutional opening up of the capital market to promote integrated development of markets. We continued to optimize the Stock Connect mechanisms between mainland China and Hong Kong and steadily expanded the scope of investment targets under the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect by successively adding companies with a weighted voting rights (WVR) structure, ChiNext Board stocks, ETFs, etc. into the Stock Connect mechanisms. Recently, we further expanded the scope of eligible stocks for trading under the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect. We also optimized the trading calendar arrangements, cutting the number of days on which trading cannot be conducted by half. Since the beginning of this year, as the Chinese economy generally recovers and takes a turn for the better, foreign investment has been flowinginto the A-share market. From January to May, the market saw a net inflow of CNY 170 billion foreign investment in to China via the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect. Over the past five years, the market capitalization of ChiNext Board-listed shares held by foreign investors via QFII/RQFII and the Shenzhen Connect grew by more than 11 times. Meanwhile, we continued to expand the scope of the varieties of commodity and financial futures available internationally, provided more hedging products and allocation instruments to foreign investors, supported cooperation in settlement price authorization of futures products, and realized diversification of opening-up channels of the futures market. We expanded and optimized the depository receipt business under the Stock Connect scheme and supported more listed companies in issuing depository receipts on the European market. The filing system of domestic enterprises for overseas listing and issuance was implemented. The first two enterprises completed filing yesterday. Meanwhile, we strengthened capital market regulation and regulatory capability building while expanding opening-up to ensure stable market operation.

We sincerely invite eligible international financial institutions and investors to continue to seize opportunities to expand investment scale and standard in China and share the dividends from the healthy and stable growth of the Chinese economy. We are looking forward to more multi-level communication and cooperation events of various forms with you and building an efficient and inclusive global capital market that will inject more innovation vitality and stabilityinto the development of the world economy.

Finally, I wish the Conference a complete success. Thank you!

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