top of page

A decade of transformation turns China's financial market into the larger global presence

China's financial market, young and fast-growing, is at a new outset to open up further to the global markets, building on the transformative steps it has taken in the past decade.


Photo taken on Oct. 19, 2020 shows an exterior view of the People's Bank of China in Beijing, capital of China. (Xinhua/Peng Ziyang)

The country's equity and bond markets expanded 238.9 per cent and 444.3 per cent respectively over the past 10 years, now both the second largest worldwide, official data showed.


It has also attracted more foreign investors and institutional investors, diversified investment options, and given rise to a bevy of world-class industry bellwethers.



Chen Yulu, vice governor of the People's Bank of China, at a recent press conference said-

Looking ahead, China's financial sector will remain committed to unremitting reform and opening up to ensure long-term stability

BETTER PLAYING FIELD


Over the past decade, China's financial market has sharpened its appeal to investors worldwide through reforms to render a more market-oriented and rules-based environment.


Wu Xiaoqiu, former vice president of the Renmin University of China and president of its China Capital Market Research Institute said-

A major milestone is the introduction of a registration-based initial public offering (IPO) system, which signifies that China's capital market is taking the market-oriented turn

The country vowed to carry out the system in a decision adopted at the Third Plenary Session of the 18th Central Committee of the Communist Party of China in 2013. It was first piloted at the sci-tech innovation board at the Shanghai Stock Exchange in 2019.


It helped improve the transparency of China's capital market and spur innovation and growth potential of listed companies, making the equity market more investment-worthy and paving the way for further opening of the capital market, said Wu.


To tilt financing more in favour of smaller companies and innovation-powered ones, China launched the sci-tech innovation board in 2019 and the Beijing Stock Exchange in 2021 in supplement to the blue chip-dominant main boards of the Shanghai and Shenzhen bourses.


Official data showed that 46 of the around 2,200 Chinese listed firms in emerging industries are each valued at over 100 billion yuan (about 14.9 billion U.S. dollars), up from zero 10 years ago.


The market is given an increasingly prominent role in China's financial sector to discern the quality firms and sift out the underperformers. In the A-shares, funds now distinctively favour firms with robust earnings, said Li Chao, vice chairman of the China Securities Regulatory Commission (CSRC), adding that companies delisted between 2019 and 2021 more than tripled that of the previous decade combined thanks to an upgraded regulatory mechanism.


The rule of law is also being strengthened in the capital market. The new securities law effective on March 1, 2020, and a series of regulatory documents raised penalties for financial crimes, while the "zero-tolerance" policy of law enforcement enhanced deterrence.



In a nod to the evolution of China's capital market, major global benchmarks like MSCI, FTSE Russell, and the S&P Dow Jones have included the A-shares and strengthened their weightings. China's government bonds also made their way into three major global bond market indices.

HAPPIER PARTICIPANTS


A welcoming playing field has benefited financial institutions and investors from home and abroad.


Zhai Chenxi, vice president of TF Securities said

The expansion of China's capital market in the past decade spawned and nurtured financial services providers, including brokerages, mutual funds and banks

The total asset of China's futures and securities brokers increased 5.5 times over the period, while public offering funds now manage 26 trillion yuan of assets, nine times that of 10 years ago.


To attract foreign investors, China scrapped foreign ownership caps for securities, fund management, futures, and life insurance firms; and launched the Shanghai-Hong Kong, and Shenzhen-Hong Kong stock connect schemes. It also allowed eligible overseas institutional investors to invest directly or through connectivity in the exchange bond market from June 30.


As a result, overseas entities' holdings of domestic renminbi (RMB) financial assets have increased by 2.4 times compared with 10 years ago, while the weighting of the RMB in the International Monetary Fund's Special Drawing Rights basket has risen from 10.92 per cent in 2016 to 12.28 per cent.


Samuel Fischer, Deutsche Bank's head of China onshore Debt Capital Markets and deputy Beijing Branch manager of Deutsche Bank (China) Co., Ltd. said-

China has made substantial progress in opening its financial market and integrating its markets into the global markets over the past few years, and we definitely expect that momentum will remain strong

"Deutsche Bank is a big promoter and beneficiary of China's financial market opening," Fischer said. China's opening of its bond market and simplified market access rules for foreign bond issuers through Panda bonds served as a big tailwind for the bank to develop its businesses, he said.



Many other foreign-funded institutions also saw their businesses grow, buoyed by China's financial opening. Last year, UBS Securities and Credit Suisse Securities (China) Limited reported net profit hikes of 130 per cent and 283 per cent respectively.


The rise of institutional investors and foreign capital benefits all market participants, including individual investors, because they provide long-term funds that reward best-performing firms and can help absorb excessive market volatility, said Zhai.


Institutional investors and foreign funds held 22.8 per cent of the total value of tradable shares by the end of May, up by 6.9 percentage points from 2016, official data showed.


TOWARD THE CENTER STAGE


On top of the accomplishments over the past decade, analysts and officials say there is still a huge potential to be tapped before China gains a presence deserving of its size in the global financial market.



At present, RMB accounts for only 2.79 per cent of global forex reserves. Foreign investors' holdings in China's stock and bond markets stand at a relatively low level of 3 per cent to 5 per cent compared with economies such as Japan, the Republic of Korea, and Brazil.


"China will eventually be home to a top financial centre of the world," said Wu. To achieve this goal would require better transparency, the rule of law, the long-term credit of the RMB, and stronger listed companies, he said.


Industry insiders also called for further facilitating foreign access to the Chinese financial market.


Authorities are on the move. The registration-based IPO system, now extended to the Beijing Stock Exchange and the tech-heavy ChiNext market on the Shenzhen Stock Exchange, will be implemented across the board to further improve the quality of China's listed firms.


The country will expand the scope of Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect schemes and offer overseas investors more cross-border investment and risk management products, said Wang Jianjun, vice chairman of the CSRC.


It will also build up supervision capacities and enhance cooperation with other countries, he added.


Overseas investors have acknowledged the appeal of RMB assets, with more than 60 per cent of overseas financial institutions surveyed by the Bank of China saying they will increase their holdings of RMB-denominated assets.


Many global financial institutions expanded their footprints in China, a token of their faith in the country's continued financial opening. UBS and Credit Suisse Group increased stakes in their respective brokerages on the Chinese mainland, while JP Morgan, Goldman Sachs, and Citigroup are actively staffing up.


Fischer said-

We are strong believers in the long-term growth prospect and the abundance of opportunities that the Chinese financial market and its continued development offers

Source: Xinhua, Editor- Huaxia

Read more from the below TAGS & Links-

32 views0 comments
Planner 5D- Interior design app

Planner 5D- Interior design app

Flipkart Online Shopping App

Flipkart Online Shopping App

World population to reach 8 billion this year, as the growth rate slows

July 12, 2022 at 6:57:56 AM

15 November 2022 is predicted to be the day that the global population reaches eight billion. The projection is revealed in the UN’s World Population Prospects 2022 report, which also shows that India is on course to surpass China as the world’s most populous country in 2023.

World population to reach 8 billion this year, as the growth rate slows

WHO: Nearly one billion people have a mental disorder

June 22, 2022 at 7:20:50 AM

Nearly one billion people worldwide suffer from some form of mental disorder, according to the latest UN data – a staggering figure that is even more worrying if you consider that it includes around one in seven teenagers.

WHO: Nearly one billion people have a mental disorder

What can the UN do? Check the top 5 questions answered

April 6, 2022 at 10:51:48 AM

The current war in Ukraine, following the Russian invasion, has sparked all sorts of questions about the United Nations, particularly the role of the Security Council, the General Assembly and the Secretary-General.

What can the UN do? Check the top 5 questions answered

Ukraine: UN’s Guterres joins call for Bucha war crimes probe

April 6, 2022 at 8:22:29 AM

UN chief António Guterres on Tuesday added his voice to the growing international calls for a war crimes investigation into the killing of civilians in the Ukrainian town of Bucha.

Ukraine: UN’s Guterres joins call for Bucha war crimes probe

Recent terrorist attacks in Israel undermine ‘prospects for peace’: Guterres

March 31, 2022 at 8:29:57 AM

Secretary-General António Guterres on Tuesday night condemned recent terrorist attacks in Israel that have claimed the lives of at least 11 Israeli citizens.

Recent terrorist attacks in Israel undermine ‘prospects for peace’: Guterres

China's BYD ceases to produce gasoline-powered vehicles

4/4/22, 7:00 AM

Chinese auto manufacturer BYD announced Sunday that it has already ceased the production of traditional gasoline-powered vehicles starting from March.

China's BYD ceases to produce gasoline-powered vehicles

Performance-oriented all-new ŠKODA SLAVIA 1.5 TSI Launched creates a segment of its own

3/27/22, 10:42 AM

All new ŠKODA SLAVIA 1.5 TSI starts at ₹ 16.19 lacs

Performance-oriented all-new ŠKODA SLAVIA 1.5 TSI Launched creates a segment of its own

CARS24 Raises $450 Million, Nearly Doubles Its Valuation To $1.84 Billion

9/25/21, 6:16 AM

CARS24, India’s leading e-commerce platform for pre-owned vehicles, announced today the closing of a $450M round of funding including a $340M Series F equity round alongside $110M debt from diversified financial institutions.

CARS24 Raises $450 Million, Nearly Doubles Its Valuation To $1.84 Billion

Tata Motors launches the ‘XPRES’ brand for fleet customers

7/18/21, 6:13 PM

Tata Motors, one of India’s leading automobile manufacturers, today announced the launch of a new brand ‘XPRES,’ exclusively for fleet customers.

Tata Motors launches the ‘XPRES’ brand for fleet customers

Audi India announces curated ownership plans for Audi e-tron and Audi e-tron Sportback customers

7/18/21, 5:56 PM

Special Service Plans, Extended Warranty and Buyback for a hassle-free ownership experience

Audi India announces curated ownership plans for Audi e-tron and Audi e-tron Sportback customers

TikTok hits 1 billion global active users

9/28/21, 8:56 AM

TikTok mission is to inspire creativity and bring joy.

TikTok hits 1 billion global active users

FACT CHECK: Crypto is increasingly being used for criminal activity and is a haven for illicit finance

6/23/21, 6:11 AM

Because cryptocurrency is still new, we are often asked about the biggest myths surrounding it. It’s common for a new market or product to confuse people until they get familiar with it. Think about Airbnb: the idea of staying in a stranger’s home seemed crazy until it didn’t.

FACT CHECK: Crypto is increasingly being used for criminal activity and is a haven for illicit finance

PUBG: NEW STATE surpasses 17 Million Google play store PRE-REGISTRATIONS following its recent ALPHA TEST

6/19/21, 4:40 AM

KRAFTON, Inc. to open pre-registration for the game on Apple’s App Store in Q3 2021

PUBG: NEW STATE surpasses 17 Million Google play store PRE-REGISTRATIONS following its recent ALPHA TEST
bottom of page