Shanghai to give foreign workers access to share options for locally-listed firms to attract more funds and talent

Daniel Ren

Shanghai plans to allow foreigners employed by regional headquarters of multinational companies to receive stock options on the A-share market, part of its bid to become a global financial powerhouse.

The step comes as ongoing protests in Hong Kong pose a threat to its status as the region’s established financial centre.

The stock options guideline, published Tuesday, aims at encouraging more regional headquarters to be set up in Shanghai. It represents the latest efforts by the mainland’s most developed metropolis to wield its influence worldwide.

The municipal government said it is working with the State Administration of Foreign Exchange to allow foreign employees to purchase mainland-listed A shares and to grant them access to share option incentives.

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“It won’t be a large volume of employee stock options for foreigners,” said Hong Lingyun, a senior executive with Shanghai-based recruitment service firm Joinlink Consulting. “But it is a sign that regulators want to facilitate foreign companies to grant stock options to their employees and attract global talent.”

An A-share option gives an investor the right to buy or sell a stock at an agreed upon price and date, and is viewed as a compensation contract between an employer and its workers. Typically, it is offered as part of the employee's pay package.

The guideline did not say when the option will become available.

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The foreign-exchange regulator is expected to publish details on the conversion of foreign currency into renminbi that will then be used to buy options and repatriate any capital gains from the options.

China has yet to allow foreign-controlled companies to raise funds on mainland stock markets through an initial public offering.

In June, Fang Xinghai, a vice-chairman of the China Securities Regulatory Commission (CSRC), told the Lujiazui Forum, a high-profile annual financial conference held in Shanghai, that Beijing was still exploring the launch of a board where international heavyweights could list. He said there would be an announcement about the board in foreseeable future.

The idea of such a board was put on ice in early 2016 when the CSRC looked to bolster investor confidence after a market meltdown that began the previous summer.

But Fang said the plan was still alive.

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Shanghai has said it wants to become a global financial centre by 2020, but it has yet to be a real threat to Hong Kong because of the inconvertibility of Chinese yuan under the capital account.

The city’s guideline said it would give Shanghai-based regional headquarters of multinational companies greater freedom in conducting cross-border fund flows to bolster trade and investment.

Shanghai reported its economic output expanded 5.9 per cent in the first half of this year, making it one of the slowest-growing provincial regions nationwide.

The municipality is stepping up efforts to attract foreign investment amid the grinding US-China trade war.

Last year, it lured Tesla, the US’ bestselling electric vehicle maker, to set up its first overseas plant at Lingang. The untapped area was included in the city’s free-trade zone last week.

Last September, Beijing for the first time allowed foreign employees working on the mainland to trade yuan-denominated A shares directly.

That policy change was expected to give trading rights to around 1 million foreigners working on the mainland.

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