China has opened its stock option market to qualified foreign institutional investors, a move aimed at boosting the appeal of yuan-denominated assets and strengthening foreign participation in its capital markets.

The Shanghai Stock Exchange announced on Tuesday that eligible overseas institutions can now apply to trade equity options for hedging purposes.

The decision comes as Beijing pushes ahead with reforms to attract global capital amid slowing domestic growth.

The new rules allow foreign investors to trade stock and exchange-traded fund (ETF) options listed on the Shanghai bourse.

Currently, five ETF-based option products are available, giving foreign institutions new tools to manage risk in China’s $14 trillion equity market.

Regulators said the expansion would help deepen market liquidity and provide global investors with greater flexibility in managing their China exposure.

This reform is part of a broader strategy by Chinese authorities to liberalize financial markets and expand access for international investors.

In recent years, steps have included easing entry into China’s bond repo market, widening trading under the Swap Connect program, and encouraging use of the digital yuan in cross-border settlements.

Together, these efforts underline Beijing’s intention to integrate more closely with global markets.

Analysts noted that giving foreigners access to options will make Chinese equities more attractive by providing a mechanism for precise hedging.

The lack of sophisticated risk management tools had been a barrier for many overseas institutions considering large-scale exposure.

By addressing this gap, regulators hope to create conditions that will sustain foreign inflows despite global market volatility and geopolitical tensions.

Despite challenges such as U.S.-China trade frictions and broader concerns over transparency, Beijing continues to prioritize reforms that enhance foreign confidence.

Opening the stock option market marks another significant step in that direction, signaling that China remains committed to financial openness while safeguarding market stability.

Source: Reuters.