Foreign funds race to explore Chinese capital market in 2023
Published: Jan 15, 2023 07:02 PM
A view of Shanghai, China's major financial hub and destination for foreign investment Photo:VCG

A view of Shanghai, China's major financial hub and destination for foreign investment Photo:VCG

Foreign financial institutions are racing to expand their operations in China along with the country's strong economic recovery expectations and accelerated financial opening-up, with Schroder Investment Management (China) becoming the fifth wholly foreign-owned public fund management firm in China that obtained approval for establishment.

As the A-share market rebound buoyed by a swift economic reopening has elevated overseas investors' enthusiasm, an expert projected on Sunday that more foreign financial firms will enter China in 2023, but it's unlikely that there will be a surge due to fierce competition.

Schroder Investment Management (China) obtained approval for the establishment of a wholly foreign-owned public fund management company in China from the China Securities Regulatory Commission on Friday.

"China has always been important in Schroders' global strategy and we are delighted to receive regulatory permission to establish a wholly foreign-owned public fund management company. It reinforces our confidence in continuing to scale up our business and investment presence in China," Lieven Debruyne, global head of distribution of Schroders, was quoted as saying on the company's website.

BlackRock Inc, Fidelity International and Neuberger Berman have already won access to China's mutual fund market. In November 2022, Manulife Investment Management obtained approval to acquire 51 percent of the shares in its Chinese joint venture Manulife TEDA Fund Management owned by its joint venture partner Tianjin TEDA International Holding.

In addition, Standard Chartered Bank (China) recently completed its first Treasury bond futures transaction through accounts opened at a futures company. This means that the bank has become the first foreign bank to participate in the trading of treasury bond futures in China, according to a press release it sent to the Global Times on January 4.

"China welcomes foreign financial institutions with sound operations and good qualifications to participate in the Chinese market, and more foreign financial firms are expected to enter China at a steady pace in 2023 since competition in the market is fierce," Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Sunday.

Given the expected rebound of the A-share market, foreign investors' enthusiasm will increase and more money is expected to flow into the equities market, Dong said.

As of Friday, the amount of "northbound capital" - foreign money flowing into China's A-share market through Hong Kong - exceeded 64 billion yuan ($9.55 billion) in the first two weeks of 2023, underscoring the attractiveness of Chinese market. 

China has steadily accelerated opening-up to let foreign capital better tap the market. The country raised the cap on the ratio of foreign shareholding in securities and fund management firms to 51 percent in 2018, and scrapped that limitation in April 2020.

Since 2017, the assets of foreign banks in China have increased by nearly 30 percent, and the assets of foreign insurance companies in China have expanded by roughly 120 percent, official data showed.

The tone-setting Central Economic Work Conference said that the country will make greater efforts to attract foreign capital, widen market access, promote the opening-up of modern services sector, and grant foreign-funded enterprises national treatment.

The foreign financial institutions' expansion in China reflects their confidence in the recovery and the long-term sustainable growth of the Chinese economy, Dong said.

China's GDP growth is expected to rebound to 4.9 percent in 2023, on the back of a consumption recovery and a stabilizing real estate sector thanks to a fast economic reopening, UBS economists led by Wang Tao wrote in a research note sent to the Global Times on Friday.

According to Economic Outlook 2023 by Standard Chartered, tight monetary policies will likely push the US and eurozone economies into recession in the first half this year.

The bank projected that China will be an important driver of global recovery in 2023, saying that economic reopening should also increase the effectiveness of other policy initiatives such as stimulus programs, lending quotas and credit support measures, providing a boost to growth.