As China’s economic growth trajectory continues, the country’s policymakers are eager to support it further by encouraging foreign fund managers to domicile new investment funds on the Mainland as a way to attract more foreign inward investment. As Chinese middle class wealth increases, domestic investors are also seeking a wider range of funds to meet their investment objectives.
As part of this internationalisation, the government is also encouraging closer ties between Chinese stock exchanges and international financial markets, including streamlining the Qualified Foreign Institutional Investors (QFII) scheme processes to make it quicker for fund managers to enter Chinese markets.
Changes to the Qualified Foreign Limited Partnership (QFLP) scheme make it easier for wholly foreign-owned asset management and investment funds to invest in private markets in China. Since the pilot scheme was launched in Shanghai a decade ago, it has expanded to ten other mainland cities.
This further increases the speed at which China’s capital markets are opening and means more foreign funds will invest in the country, increasing China’s share of total global investment.
Wealth Connect – further opening access to China
Wealth Connect, introduced in October 2021, is a cross-boundary scheme linking Hong Kong and mainland capital markets in the Greater Bay Area (GBA). The Northbound Scheme allows Hong Kong residents to invest in M wealth management products distributed by banks via designated channels. The Southbound scheme replicates this in reverse for eligible Mainland residents. The result is a significant increase in the size of the market for products in each participating area.
Crucially, Wealth Connect will support China’s growing domestic wealth market – the GBA alone contains half a million investors with over $1m in assets. More regions and cities are expected to join the scheme at the next stage.
