International Managers Given China Boost

China’s magnetic hold over global business has attracted financial and investment groups the world over to its key cities and markets in the hope of benefitting from the nation’s astounding rise.

However in order to compete firms are often forced to ‘play-ball’ if they want a slice of the action.

In funds management, this all changed last week when groups outside of China such as Fidelity and Vanguard that had opted against embarking on joint ventures with local investment firms (a prerequisite of operating as an asset manager on the mainland) were given a potential boost to access the market.

This followed a move by the China Banking Regulatory Commission to allow the country’s commercial banks to invest in stocks abroad.

The move by the CBRC will allow Chinese commercial banks to invest in international share markets for the first time, and by doing so allow offshore investment groups access to the nation’s huge pool of retail savings.

Chinese commercial banks will now be allowed to invest up to half of their pooled funds under the recently introduced Qualified Domestic Institutional Investors programme, or QDII, in offshore stocks.

Up until now the banks had been limited to investments in bonds, money-market products and fixed-income derivatives.

Not all investors will be able to invest in such products, with investors requiring at least 300,000 Yuan to access such financial products, the CBRC said.

The move is being interpreted as a way for both the nation to hopefully reduce its huge surplus of foreign exchange while allowing investors to diversify away from a local stock bourse that has sky rocketed over the past year.

The Chinese government is hoping local investors will place more of their investment assets offshore and help slow the growth in the country’s $1.2 trillion of foreign-exchange reserves.

Despite the changes, banks will still be forbidden from investing in hedge funds, commodity derivatives and securities rated below investment grade, according to the CBRC.