China has taken another step to open up its financial markets to the world by allowing investors in Hong Kong to trade shares on the Shanghai stock exchange.
Regulators unveiled the plans for a pilot program Thursday. It will also permit investors based in Shanghai to trade Hong Kong-listed shares.
The cross-market trading will be subject to daily limits and an annual quota that will cap volume in Hong Kong-listed shares at 250 billion yuan ($40 billion) and at 300 billion yuan for Shanghai stocks.
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The China Securities Regulatory Commission said it plans to start the pilot in six months, but didn't address in what currency trading would take place. Hong Kong stocks are currently traded in Hong Kong dollars, while mainland stocks are in yuan.
China has repeatedly pledged interest in financial reform, opening up its markets and promoting greater foreign investment. Allowing such mutual investment seems to be a step in the right direction -- but it's still too early to gauge the impact of the trial.
The government has also promised numerous other reforms ranging from fiscal policy to social initiatives.
Hong Kong Exchanges suspended trading of its shares on Thursday morning before the announcement.
Both markets reacted positively to the news. Hong Kong's Hang Seng Index rose 1.5%, while the Shanghai Composite added 1.4%.
