China's securities regulator said it has approved the establishment of a cross-border investment scheme to connect the stock markets of China and Japan through exchange-traded funds.

The China Securities Regulatory Commission, or CSRC, said May 24 that under the ETF Connect scheme, Chinese fund managers can set up ETFs that invest at least 90% of assets in Japan funds that track the Nikkei 225 or Topix indexes.

The launch of the ETF Connect scheme follows the signing of a memorandum of understanding in October 2018 regarding improving mutual market access between China and Japan. Yi Huiman, head of the CSRC, said in an April speech that promoting the cross-listing of ETFs will facilitate the cross-border flow of funds.