Foreign financial firms continue to benefit from China's opening-up
By Zhang Shixuan

Overseas financial institutions have leveraged China's opening-up policies to play a big role in the country's capital market, with their holdings of yuan-denominated bonds increasing by over 450 billion yuan ($69.5 billion) in the first half of this year, up 40 percent from a year ago.

The country announced further financial liberalization in July, as it will improve regulations on cross-border transactions between parent and subsidiary firms and introduce more ways for foreign capital to participate in domestic financial markets.

Having been doing business in China for 14 years, Fullerton became the first Singapore-based asset management company to be granted RMB Qualified Foreign Institutional Investor status and approved for dealing on the China Interbank Bond Market in 2017.

With its wholly foreign-owned entity in Shanghai, Fullerton launched its first equity private fund in China in 2018. Since then, it has been offering services to not just overseas clients, but also to domestic investors. Fullerton's investments have seen an annualized return rate of 14.6 percent ever since, and the company is looking forward to more. 

James Zhang, the general manager of Fullerton Investment Management in Shanghai, said many A-share listed companies have high-quality assets, with large profit capabilities and potential.

"Since the coronavirus outbreak, China's overall monetary policy has remained relatively loose. So we are optimistic about the mainland stock market, and the bond market as well," Zhang said.

J.P. Morgan's office in Shanghai. /CFP

J.P. Morgan's office in Shanghai. /CFP

Among others, J.P. Morgan has just announced it has got the green light to take complete ownership of J.P. Morgan Securities China from its four Chinese shareholders, becoming the first foreign firm to fully own a securities venture in the country.

J.P. Morgan says China represents one of the largest opportunities in the world for many of its clients and for itself, and it will also help Chinese companies grow internationally.

These developments not only highlight the enthusiasm of foreign financial institutions for operating in China, but also reflect Chinese regulators' resolve to advance financial liberalization.

In recent years, more than 100 foreign-invested banks and insurance, securities, payment and clearing institutions have been approved and set up in the Chinese mainland.

They have been actively expanding the scope of businesses, especially since the government scrapped foreign ownership limits on securities firms and mutual funds last year.

The Lujiazui Administrative Bureau in Shanghai helps companies with their business registration, location choices and recruitment locally.

Xu Jing, head of the Finance and Shipping Office at the Bureau, said his office is working on promoting policies and strengthening the confidence of overseas companies in China.

Experts say the arrival of  foreign-invested financial institutions will potentially put pressure on domestic firms.

Jacob Zhu, a financial services partner at accounting firm EY, said overseas firms will probably avoid competing with local firms in traditional retail business transactions and credit trading.

"But foreign financial companies will present great challenges to local firms in serving high-end or high-net-worth clients," Zhu said.

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