China approves new mainland stock link to Hong Kong

HONG KONG (AP) — China's Cabinet approved a long-awaited initiative Tuesday that will give foreign investors more access to Chinese stocks by linking stock exchanges in Hong Kong and the mainland city of Shenzhen.

Hong Kong is Chinese territory but its financial system is open to foreign investors, while mainland markets are largely sealed off from global capital flows.

"Based on the success of the Shanghai-Hong Kong link, the launch of the Shenzhen-Hong Kong link marks a concrete step toward making Chinese capital markets more law-based, market-oriented and globalized," Premier Li Keqiang, the country's top economic official, said in the statement.

[...] the launch of the Shanghai-Hong Kong link, only a few foreign institutions were allowed to buy mainland-traded shares in a closely regulated system.

Li dismissed fears that Hong Kong's trading systems would be unable to handle the volatility if there's a repeat of the market meltdown across the border, saying it's no reason to delay the launch.