On October 26, 2018, the Shanghai Stock Exchange of China and the Japan Exchange Group signed an agreement to strengthen ties with promotional actions to create programs that facilitate the listing of ETFs in each market, making it easier for investors in each country to invest in ETFs located in the other world. The Japan-China ETF Connectivity agreement was reached in the form of three Nikkei 225 ETFs and one TOPIX ETF, listed on the Shanghai Stock Exchange, as well as two Listed Chinese Stock Exchange ETFs on June 25, shortly before Xi Jinping`s first state visit to Japan for the G20 summit at the end of the month. As part of this agreement, Chinese ETF suppliers will create ETFs that invest primarily in Japanese companies and vice versa. The agreement will open the Japanese ETF market to the world`s most populous country with the world`s second largest gross domestic product. Background In October 2018, the SSE signed a memorandum with JPX to strengthen cooperation relations on discussions and promotion for the establishment of the China-Japan ETF connectivity regime, in the context of regulators` commitment to cooperation in the financial markets between China and Japan. At the Sino-Japanese Capital Markets Forum on April 22, 2019, SSE and JPX signed an agreement to implement the connectivity program. What is China-Japan ETF Connectivity The framework of China-Japan ETF connectivity was developed jointly by SSE and JPX after an in-depth study of the characteristics of both markets and a comprehensive understanding of cross-border investment needs. Under the program, a Chinese ETF provider with a QDII quota will be able to: develop a feeder ETF that invests more than 90% of its assets in an ETF listed on TSEs, and a Japanese ETF provider with a QFII/RQFII ratio will be able to develop a feeder ETF that invests more than 90% of its assets in an SSE-listed ETF. This regime establishes a convenient link between the two markets and promotes mutually beneficial cooperation on the basis of the partnership between the two exchanges. Characteristics and meaning 1. The China-Japan ETF Connectivity System is a comprehensive and complex connectivity mechanism for both capital markets The system takes into account the comparative advantages of SSE and JPX and embodies the principle of win-win cooperation for stakeholders, including asset management companies, index providers and custodian banks.