People walk in front of the Shenzhen Stock Exchange in South China’s Guangdong Province in May 2016. Photo: IC

The Chinese mainland equity market has attracted more than 240 billion yuan ($34 billion) of capital from overseas since the beginning of 2019, a strong indication of global investors' rising confidence, Li Chao, vice chairman of the China Securities Regulatory Commission, said during a forum in Guangzhou, South China's Guangdong Province Saturday.

With the increasing potential for profitability in the Chinese market, more foreign investment, including from the US, will be drawn in despite the US government's attempt to restrict investment into Chinese companies, experts said.

According to media reports, the US is attempting to delist some Chinese companies listed in the US and limiting US government retirement funds from investing in Chinese equities.

"Based on the relative low valuation of China's A shares, investing in the mainland market is an opportunity that foreign investors definitely cannot miss, especially with many foreign investors trying to avoid risks from global markets," Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times. 

"More investment, especially from large institutions, is expected to flow in," Dong said. 

As of the close on Tuesday, global index complier MSCI is expected to add 204 mainland shares to the MSCI China Index, increasing its inclusion factor to 20 percent from 15 percent. After the adjustment, A-shares will have weights of 12.1 percent and 4.1 percent in the MSCI China and MSCI Emerging Markets Indexes, and more than $31.5 billion in investment is expected to invest in Chinese stocks, domestic news site thepaper.cn reported.

The increasing weightings in the MSCI indexes is but a small example of the growing enthusiasm of international investors. In the next decade, China's A-share market is expected to pull in as much as 5 trillion yuan as the financial system continues to open up, Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Sunday. 

"With the scrapping of quota limits for foreign institutional investors in the market, and the opening of the Shanghai-London Stock Connect and Shenzhen-Hong Kong Stock Connect, obstacles have been removed for overseas capital to enter the financial system in China's mainland," Yang said. 

Following the success of the Shanghai-London Stock Connect, the China Europe International Exchange is also advancing the process of establishing a Shanghai-Frankfurt Stock Connect, a link between China's and Germany's stock markets to facilitate more investment.

"With the unique Chinese depositary receipt listings of German blue-chips in Shanghai, we see great opportunity to further facilitate the two-way opening up of the Chinese capital markets and to bring the European and the Chinese markets closer together," according to CEINEX's statement to the Global Times.