China and Saudi Arabia are in talks to allow exchange-traded funds (ETFs) to list on each other’s stock exchanges. This move is aimed at deepening financial ties between the two countries as their diplomatic relations warm up. The Shenzhen Stock Exchange in China is negotiating with the Saudi Tadawul Group, operator of the Saudi Stock Exchange, for the ETF Connect program. This would be the first such tie-up between China and a country outside of East Asia. It signifies China’s commitment to opening up its financial markets to international investors. Some of China’s biggest ETF operators have been informed about the possibility of a cross-listing agreement with Saudi Arabia. The cross-listing of ETFs would allow investors in both countries to trade funds tracking specific stocks or bond indexes listed on each other’s exchanges. China has initiated similar “ETF Connect” projects with stock exchanges in Hong Kong, Japan, South Korea, and Singapore. The trading volumes for these programs have not yet taken off, although some products have been popular. Hong Kong Exchanges and Clearing Ltd (HKEX) is also in separate talks with its Saudi counterpart for a similar program. China and Saudi Arabia have been expanding their ties beyond energy, with cooperation in trade, investment, and security. China is Saudi Arabia’s top trading partner, with $87.3 billion worth of trade in 2021.
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