There is little doubt that China’s further integration into the global economy and the opening of its financial markets are among the most significant opportunities now presented to investors across the globe.
China’s transformation is without parallel in economic history 1 and now the country is reforming 2 and reshaping to become the engine of growth in the 21st Century. 3
“Having called for a new era of global openness, China has therefore raised expectations that it will reform faster,” explained Stuart Gulliver, Group Chief Executive at HSBC at the recent HSBC China & RMB Forum.
“While China remains committed to steady but sustained reform, a combination of currency pressure and external challenges have caused it to slow the pace of change and focus instead on guaranteeing economic stability.”
China posted an enviable growth rate of 6.7 per cent last year 4; the target for 2017 is 6.5 per cent 5 or higher. The country continues to reform, opening its capital account and financial markets to increased foreign investment.6
“We've seen more outreach to global investors, more openness and greater willingness to share information, and that's very useful for the investor community and we hope to see more of that,” expresses Steven Watson, Chairman, China Group, Capital Group. “There's also a greater focus on transparency, there's greater focus on good principles of corporate governance and that helps to make a healthy stock market.”
Beijing has promised to open up even further. Recently foreign investors were given freer access to the world’s third biggest bond market. 7 This comes after the International Monetary Fund admitted the Yuan into its basket of reserve currencies. 8
“China genuinely wants the markets to play a more important role in capital allocation and it helps the government politically and internally to drive and support some of the reforms that they know need to happen, particularly with state-owned enterprises,” expresses Michael Falcon, CEO, Global Investment Management Asia Pacific at J.P. Morgan. “It is about using the power of markets to drive some of the reforms that they know need to take place over the next 20 to 30 years.”
With China now such a significant economic player globally, financial institutions are increasingly positioning themselves to take investors onshore. 7 “As its financial markets become more open, they're becoming much more integrated too. You've got China growing at a fast pace, investors and now thinking, how long can I afford to not be exposed to this economy,” explains Bill Maldonado, Chief Investment Officer at Equities HSBC Asset Management.
1. China's Global Rise Brookings Institution
2. Premier Li: Unleash productivity through reforms Xinhua
3. China in 2017: anchor of stability, engine of world growth The State Council, PRC
4. China Ends Year of Stabilization on High Bloomberg
5. China Sets Growth Target of About 6.5% Bloomberg
6. China allows more foreign investment in onshore financial market Xinhua
7. China's $9 Trillion Bond Market Lures Neuberger, Fidelity Bloomberg
8. IMF Adds Chinese Renminbi to Special Drawing Rights Basket IMF
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