(Yicai Global) Jan. 23 -- China is  looking to welcome more diverse types of foreign firms to enter the  country, which will improve the quality of the capital markets,  according to the vice chairman of the nation's securities regulator. 

China would like to see foreign companies  from different sectors to enter and it also wants to expand two-way  capital flows, Fang Xinghai from the China Securities Regulatory  Commission said during a panel discussion held yesterday at the World  Economic Forum's annual meeting in Davos. 

Opening-up benefits China, Fang said,  giving two examples. Morgan Stanley Capital International added Chinese  A-shares to its global indexes last year, which improved the quality of  the Chinese capital markets. Last August, the Shanghai Stock Exchange  also adapted to international investors' wishes by adopting a call  auction at the end of each trading day to determine prices for the  following day in order to curb manipulation. 

China will strive to introduce  international medium and long-term funds into the Chinese stock market,  Fang said on Jan. 12, adding he expects that foreign capital flowing  into the A-share market, meaning the Chinese mainland stocks, will  increase further this year. 

Last year, the A-share market had a net  inflow of CNY300 billion (USD44.1 billion), Fang said earlier, adding  that the number is expected to reach CNY600 billion, considering global  index providers' plans. The MSCI is considering to increase the  weighting of Chinese stocks in its indexes up to 20 percent. The FTSE  Russell will start adding Chinese stocks to its indexes in June,  gradually raising the weighting up to 25 percent by 2020. The S&P  Dow Jones indexes may also bring USD15 billion of inflows into the  markets.

The CSRC opened the country's financial  sector last year in allowing foreign securities companies, fund  management firms and futures traders to acquire up to a 51 percent stake  in their joint ventures with local partners. Full ownership may be in  the cards after three years. Swiss UBS was the first to take the chance  to increase its stake while several American, Japanese and European  investment banks are pursuing the same path, according to Fang's earlier  statement.

China is capable of risk management, even  if the country hasn't experienced a serious financial crisis before,  Fang said in Davos. The prowess comes from a thorough management system,  according to him. The central government communicates with the  financial sector frequently and intervenes if risks build up. Some  loopholes in the system may cause volatility in the market but the  system is also quick to contain issues. Once the economic growth  accelerates, the risks will be dispersed, Fang added.

China has a relatively high savings rate,  but the country is also continuously investing in overseas markets,  Fang said. China won't significantly reduce its US debt holdings since  the US Treasury bonds are still an ideal investment destination,  according to him. China reduced its holdings of US government debt for  the fifth consecutive month in October, with the holdings dropping  USD12.5 billion monthly to the lowest level since May 2017.

Editor: Emmi Laine