China approves short selling, index futures “in principle”; move could open up securities lending in country

China has given approval “in principle” to a number of financial reforms, which could aid the development of a securities lending market in the country.

Investors in China will soon be able to sell stocks short, as well as have access to stock market index futures and margin trading.

According to reports, the reforms – posted on the China Securities Regulatory Commission’s website - had initially been approved by the Chinese government in 2008 but the effects of the global financial crisis stifled attempts to introduce them.

The introduction of short selling could aid securities lending in China, as hedge funds often borrow securities in order to sell them short.