Sumary of In Depth: China’s Opened Its Doors to Foreign Financial Firms – Can They Prosper?:
- Over the past three years, China has accelerated the opening-up of its financial sector, giving foreign institutions unprecedented access to investors in the world’s most populous nation and to one of the biggest capital markets.
- After pledging in 2017 to remove barriers to ownership, the government finally started to give the greenlight in 2020 for companies including Goldman Sachs Group Inc. to operate wholly owned companies on the Chinese mainland for a range of financial services including mutual fund management, life insurance, and securities and futures broking.
- 10, the China Securities and Regulatory Commission (CSRC) approved another 101 overseas institutions to invest in the domestic capital market via the QFII program, the highest on record.
- The opening-up measures have led to a surge in yuan-denominated financial assets in onshore markets held by foreign investors, namely stocks, bonds, bank loans and deposits.
- “It’s not just about bringing in foreign investors, what is more important is to let them develop smoothly and successfully in China,” said an executive working at a foreign-funded financial institution.
- The onslaught of regulatory tightening on various sectors including fintech and education over the past year has shaken investor confidence.
- In the asset management and wealth management sectors, new foreign entrants don’t have a long track record in the domestic market to burnish their credentials and the highly competitive nature of the market makes it difficult to differentiate themselves and launch innovative products.
- Foreign financial institutions are well aware of those challenges, however, and many have been present on the mainland for years, building up an understanding of the regulatory framework and the market through joint ventures as they awaited the green light to go it alone.