China has the world’s second largest economy, second largest equity market and third largest bond market. However, due to capital flow control, regulatory constraints and other reasons, international investors have had very limited participation in the Chinese capital market.
But this is changing. In recent years, China has clearly adopted a policy to encourage capital inflow, by broadening investment channels and relaxing regulatory constraints. Meanwhile, the international investment community responded positively too. MSCI has included China A shares in its global equity indices and FTSE Russell has announced the same.
The Chinese asset management industry is also experiencing fundamental changes and rapid open-up. Domestic managers are improving their operations and governance, aiming at increasing their international client base. Their adoption of digital technology is pressing ahead rapidly and ESG also gets on the agenda of many of the leading players. Meanwhile, most of the major global asset management houses have built up their China presence and local product offering, bringing their global experience and expertise to the China market. The reform of the pension system and the growth of institutional investors in China offer solid support to the expansion of asset management businesses for both local and international houses.