CHINA is expected to set up an equity trading platform in the Shanghai free trade zone this year, allowing both domestic and foreign companies to raise funds by selling equities, said the head of the Shanghai Equity Exchange, an over-the-counter equity marketplace for unlisted firms in Shanghai.

    The move is part of China’s efforts to ease capital controls and push forward the internationalization of the yuan. However, when and how foreign companies can tap into the new platform depends on how quickly China moves toward liberalizing its capital account, Zhang Yunfeng, the president of the Shanghai Equity Exchange, said Friday.

    China maintains a tight grip on its stock markets and doesn’t allow foreign companies to issue shares in the world’s second-largest economy.

    Foreign firms are barred from raising capital via initial public offerings in China due partly to the country’s foreign exchange controls. The free trade zone in Shanghai, which opened in September 2013, had sparked hopes for a breakthrough after the People’s Bank of China said in December that it would ease the way for foreign investors to plow money into the zone and let Chinese residents use the zone as a base for investment overseas by loosening restrictions on investment flows.

    Market participants are expecting China to publish more details on cross-border fund flows in the zone in the months ahead, which would make it clearer how foreign investors can tap into the planned platform.

    Firms trading on the planned platform won’t be able to conduct initial public offerings, but they can raise funds through equity sales and private placements of shares. (SD-Agencies)