Int'l financial institutions bullish on Chinese market

In early 1990s, Principal Financial Group (PFG), an American global financial investment management and insurance company, set up its representative office in Beijing, together with many other international financial institutions drawn to China in search of business opportunities.

Since then, PFG has maintained a strategic cooperative relationship with China Construction Bank (CCB). In 2005, they jointly established CCB Principal Asset Management Co., Ltd., which has become an important player in China's asset management industry.

PFG's footprint in China gives a glimpse into the thriving development of international financial institutions in the country.

More favorable policies

To attract foreign investors, China scrapped foreign ownership caps for securities, fund management, futures and life insurance firms. It also allowed eligible overseas institutional investors to invest directly or through connectivity in the exchange bond market from June 30 this year.

The policies were welcomed by international financial institutions and further enhanced the appeal of China's financial industry and market.

"It took only about 13 months, between May 2020 and June 2021, for us to obtain approval for business. This was quite fast for a money broking business," said Ono Tomoyuki, vice president of Ueda Yagi Money Broking (China) Co., Ltd.

Despite the pandemic, the company had formed partnerships with over 1,100 institutions by the end of July this year.

Many other foreign-funded institutions also saw their businesses grow, buoyed by China's financial opening up.

"Over the past year, we have accelerated businesses in initial public offerings, refinancing, cross-border mergers and acquisitions, and green bonds. We have also become the first batch of members of the Beijing Stock Exchange," said Geng Xin, CEO of Daiwa Securities (China).

Geng noted that the company is focusing on consumer sector, health care sector, and advanced manufacturing sector, and is committed to building a bridge between China and Japan in business and capital exchanges.

As the world's second-largest economy, China is one of the most popular destinations for foreign investment, and its appeal has become even stronger over the past decade due to the steady financial opening-up.

In 2021, the capital and assets of foreign banks in China both increased by more than 50 percent compared with 10 years ago, and for foreign insurance companies, the figures surged by 1.3 times and six times, respectively.

Overseas investments in Chinese securities came in at US$2.16 trillion at the end of last year, marking a three-times increase from that of 2012.

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.

"As more foreign investors enter China's onshore capital markets, Fitch Bohua will gain recognition from more market participants," said Chen Dongming, president of Fitch Bohua, the rating agency's China unit.

"We will seize the new opportunities created by regulatory reforms and rapidly changing market demands," Chen added.

Positive expectations

The global economy is on track to grow by 2.9 percent in 2022, down 1.2 percentage points from the January projection, the World Bank Group said in its Global Economic Prospects in June.

As per projections, China's economic growth momentum is expected to rebound in the second half of 2022.

A number of executives from international financial institutions have expressed confidence in China's economy despite global inflationary pressure and a sluggish economic recovery.

"As a foreigner working in China, I think China's economic development is full of resilience, strong momentum and optimistic prospects," Ono Tomoyuki said.

China will achieve steady and sustained economic development as it boasts large market entities, complete industrial systems, a diligent workforce and strong social governance ability, Ono Tomoyuki added.

Despite the COVID-19 pandemic and increased risks and challenges from the external environment, the international market demand remains overall stable, said Zhang Chi, Fitch Bohua's rating director.

Noting that in June, China's exports posted better-than-expected growth, Zhang said it is expected that the country's imports and exports will maintain steady growth in the second half of the year.

"We are optimistic about the performance of China's economy in the second half of the year, and more capital will flow into industries and markets which have huge growth potential," said Geng with Daiwa Securities (China).