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There is a multi trillion dollar institutional investor market in China. The [[Boston Consulting Group]] emphasises in a report published in July 2017 that China has a promising new market for investors.<ref>{{Cite news|url=https://www.cnbc.com/2017/08/21/global-funds-expanding-into-massive-chinese-investment-market.html|title=Global funds expanding into massive Chinese investment market|last=Cheng|first=Evelyn|date=2017-08-21|work=CNBC|access-date=2017-09-13}}</ref> China's economic model is changing from one focused on export development to one that seeks new sources of growth through domestic consumption and more open markets.<ref name=":0">{{Cite web|url=https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/China/News-and-Insights/the-future-of-australian-finance-in-china|title=Insight - The future of Australian finance in Chin|last=Commission|first=Australian Trade|website=www.austrade.gov.au|language=en|access-date=2017-09-13}}</ref> Being part of a free trade agreement allows those countries who are involved to have access to China's financial services market for their country's banks, insurers and securities as well as fund manager.<ref name=":0" /> Australia is one of twelve countries in [[Asia]] to be granted access to the [[Renminbi|RMB]] Qualified [[Foreign Institutional Investor]] Program. This will give millions of [[Superannuation in Australia|superannuation]] holders in Australia access, through their [[Funding|funds]], to the dynamic shares of China's firms.<ref name=":0" />
There is a multi trillion dollar institutional investor market in China. The [[Boston Consulting Group]] emphasises in a report published in July 2017 that China has a promising new market for investors.<ref>{{Cite news|url=https://www.cnbc.com/2017/08/21/global-funds-expanding-into-massive-chinese-investment-market.html|title=Global funds expanding into massive Chinese investment market|last=Cheng|first=Evelyn|date=2017-08-21|work=CNBC|access-date=2017-09-13}}</ref> China's economic model is changing from one focused on export development to one that seeks new sources of growth through domestic consumption and more open markets.<ref name=":0">{{Cite web|url=https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/China/News-and-Insights/the-future-of-australian-finance-in-china|title=Insight - The future of Australian finance in Chin|last=Commission|first=Australian Trade|website=www.austrade.gov.au|language=en|access-date=2017-09-13}}</ref> Being part of a free trade agreement allows those countries who are involved to have access to China's financial services market for their country's banks, insurers and securities as well as fund manager.<ref name=":0" /> Australia is one of twelve countries in [[Asia]] to be granted access to the [[Renminbi|RMB]] Qualified [[Foreign Institutional Investor]] Program. This will give millions of [[Superannuation in Australia|superannuation]] holders in Australia access, through their [[Funding|funds]], to the dynamic shares of China's firms.<ref name=":0" />


Mainland China’s two stock exchanges both have [[A-share (mainland China)|A share]] and [[B-share (mainland China)|B share]] markets. A shares are denominated in RMB whilst the B shares is in foreign currency. The foreign currency used is in [[United States dollar|US dollars]] in [[Shanghai]] and [[Hong Kong]] dollars in Shenzhen. The A shares are closed off to foreign investors with the exception to a select number of institutions from overseas and is used by Chinese companies. Qualified Foreign Institutional Investors who have special permission from the Chinese government can participate in this market.<ref>{{Cite news|url=https://www.cnbc.com/id/49441597|title=The ABCs of China’s Share Markets|last=Group|first=Mark Mobius {{!}} Executive Chairman, Templeton Emerging Markets|date=2012-10-16|work=CNBC|access-date=2017-09-14}}</ref> The B shares are open to both Chinese and foreign investors. <ref>{{Cite web|url=http://lexicon.ft.com/Term?term=a_share/b_share-markets|title=A-Share/B-Share Markets Definition from Financial Times Lexicon|website=lexicon.ft.com|language=en|access-date=2017-09-14}}</ref> There are 1343 listed companies on the Shanghai Stock Exchange<ref>{{Cite web|url=http://english.sse.com.cn/|title=Shanghai Stock Exchange|last=|first=|date=2017-09-14|website=www.ssc.cn|archive-url=|archive-date=|dead-url=|access-date=}}</ref>, whilst there is 2034 listen companies on the Shenzhen Stock Exchange. <ref>{{Cite web|url=http://www.szse.cn/main/en/|title=Shenzhen Stock Exchange|website=www.szse.cn|access-date=2017-09-14}}</ref>
Mainland China’s two stock exchanges both have [[A-share (mainland China)|A share]] and [[B-share (mainland China)|B share]] markets. [[A-share (mainland China)|A shares]] are denominated in RMB whilst the [[B-share (mainland China)|B shares]] is in foreign currency. The foreign currency used is in [[United States dollar|US dollars]] in [[Shanghai]] and [[Hong Kong]] dollars in Shenzhen. The A shares are closed off to foreign investors with the exception to a select number of institutions from overseas and is used by Chinese companies. Qualified Foreign Institutional Investors who have special permission from the Chinese government can participate in this market.<ref>{{Cite news|url=https://www.cnbc.com/id/49441597|title=The ABCs of China’s Share Markets|last=Group|first=Mark Mobius {{!}} Executive Chairman, Templeton Emerging Markets|date=2012-10-16|work=CNBC|access-date=2017-09-14}}</ref> The B shares are open to both Chinese and foreign investors. <ref>{{Cite web|url=http://lexicon.ft.com/Term?term=a_share/b_share-markets|title=A-Share/B-Share Markets Definition from Financial Times Lexicon|website=lexicon.ft.com|language=en|access-date=2017-09-14}}</ref> There are 1343 listed companies on the Shanghai Stock Exchange<ref>{{Cite web|url=http://english.sse.com.cn/|title=Shanghai Stock Exchange|last=|first=|date=2017-09-14|website=www.ssc.cn|archive-url=|archive-date=|dead-url=|access-date=}}</ref>, whilst there is 2034 listen companies on the Shenzhen Stock Exchange. <ref>{{Cite web|url=http://www.szse.cn/main/en/|title=Shenzhen Stock Exchange|website=www.szse.cn|access-date=2017-09-14}}</ref> By adding foreign investors into the A shares mix, this opens up significant inflows of funds into China's market.

There are a number of risks to be considered when investing in the Chinese finance industry. Economically, China has been slowing down in recent years. It is the 21st month in a row that Chinese imports have declined, and exports have declined by 4.4% which has been a trend in 12 out of 13 of the past months. <ref name=":1">{{Cite web|url=http://blog.wallstreetsurvivor.com/2016/09/08/investing-in-china/|title=Investing in China: Trends You Need To Know - Wall Street Survivor Blog|last=Survivor|first=Team Wall Street|website=blog.wallstreetsurvivor.com|language=en-US|access-date=2017-09-18}}</ref> China's GDP growth has also been on the decline and China has a rising debt level causing the Shanghai composite index to decline by 20%.<ref name=":1" />

There are a high number of benefits of investing in the Chinese finance industry. As one of the world's largest economies, China appears to be an attractive market to invest in. China's economy has grown more than 90 times since 1978 and has survived a number of economic downturns and has still shown growth during these periods. Analysts predict that China will overtake the [[United States|USA]] as the largest economy in the world by 2027.<ref name=":2">{{Cite news|url=https://toughnickel.com/business/Reasons-to-Invest-in-China-Market|title=China's Competitive Advantage in the Global Market|work=ToughNickel|access-date=2017-09-18|language=en}}</ref> People want to invest in a market with great potential and as China is growing into a consumer driven economy with less emphasis on saving and become more of a free market economy, the country will become a more investor friendly market. China also has a population of 1.351 billion in 2012 which means there is a large population base to produce goods and invest in the market, increasing the potential of the country.<ref name=":2" /> China's population is made up of consumers who are willing to pay premuim price for a product or service. This increased the market's potential spending power increasing the potential size of the market.<ref name=":2" /> China has a single party political system, and this provides political stability for the country and are at a low political risk. Investing in a county with a stable political environment is an important consideration. Additionally, international companies choose to relocate their business or manufacturing to China due to the low costs associated which in turn creates a more stable economy and flow of jobs for people in China, adding to the credibility of the country. <ref name=":2" />


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Revision as of 05:46, 18 September 2017

Investing in the Chinese Finance Industry

Background Information

China's market economy is the second largest economy in the world based on GDP.[1]China has become the centre for global manufacturing, and now has the largest manufacturing economy in the world and is the largest exporter of goods worldwide.[2] China is also the fastest growing consumer market and the second largest importer of goods in the world.[3] China plays an important role in international trade and has become the second largest trading nation as of 2016.[4] China have been a part of trade organisations and treaties and became a member of the World Trade Organisation in 2001.[5] China have developed a number of free trade agreements with several different nations, including Australia, South Korea, New Zealand, Switzerland, and Pakistan.[6] China has two stock exchanges, the Shanghai Stock Exchange and the Shenzhen Stock Exchange with the value of the stock market being $4.48 trillion as of November 2014, making it the second largest stock market in the world.[7]

Analysis

There is a multi trillion dollar institutional investor market in China. The Boston Consulting Group emphasises in a report published in July 2017 that China has a promising new market for investors.[8] China's economic model is changing from one focused on export development to one that seeks new sources of growth through domestic consumption and more open markets.[9] Being part of a free trade agreement allows those countries who are involved to have access to China's financial services market for their country's banks, insurers and securities as well as fund manager.[9] Australia is one of twelve countries in Asia to be granted access to the RMB Qualified Foreign Institutional Investor Program. This will give millions of superannuation holders in Australia access, through their funds, to the dynamic shares of China's firms.[9]

Mainland China’s two stock exchanges both have A share and B share markets. A shares are denominated in RMB whilst the B shares is in foreign currency. The foreign currency used is in US dollars in Shanghai and Hong Kong dollars in Shenzhen. The A shares are closed off to foreign investors with the exception to a select number of institutions from overseas and is used by Chinese companies. Qualified Foreign Institutional Investors who have special permission from the Chinese government can participate in this market.[10] The B shares are open to both Chinese and foreign investors. [11] There are 1343 listed companies on the Shanghai Stock Exchange[12], whilst there is 2034 listen companies on the Shenzhen Stock Exchange. [13] By adding foreign investors into the A shares mix, this opens up significant inflows of funds into China's market.

There are a number of risks to be considered when investing in the Chinese finance industry. Economically, China has been slowing down in recent years. It is the 21st month in a row that Chinese imports have declined, and exports have declined by 4.4% which has been a trend in 12 out of 13 of the past months. [14] China's GDP growth has also been on the decline and China has a rising debt level causing the Shanghai composite index to decline by 20%.[14]

There are a high number of benefits of investing in the Chinese finance industry. As one of the world's largest economies, China appears to be an attractive market to invest in. China's economy has grown more than 90 times since 1978 and has survived a number of economic downturns and has still shown growth during these periods. Analysts predict that China will overtake the USA as the largest economy in the world by 2027.[15] People want to invest in a market with great potential and as China is growing into a consumer driven economy with less emphasis on saving and become more of a free market economy, the country will become a more investor friendly market. China also has a population of 1.351 billion in 2012 which means there is a large population base to produce goods and invest in the market, increasing the potential of the country.[15] China's population is made up of consumers who are willing to pay premuim price for a product or service. This increased the market's potential spending power increasing the potential size of the market.[15] China has a single party political system, and this provides political stability for the country and are at a low political risk. Investing in a county with a stable political environment is an important consideration. Additionally, international companies choose to relocate their business or manufacturing to China due to the low costs associated which in turn creates a more stable economy and flow of jobs for people in China, adding to the credibility of the country. [15]


  1. ^ "How is China shaping the global economic order? | ChinaPower Project". ChinaPower Project. 2016-03-09. Retrieved 2017-09-13.
  2. ^ "China Widens Lead as World's Largest Manufacturer - Industry Market Trends - ThomasNet News". news.thomasnet.com. Retrieved 2017-09-13.
  3. ^ "China: Fastest Growing Consumer Market in the World | IMF Blog". blogs.imf.org. Retrieved 2017-09-13.
  4. ^ "US overtook China as top trading nation in 2016- Nikkei Asian Review". Nikkei Asian Review. Retrieved 2017-09-13.
  5. ^ "WTO | 2017 Press Releases -Trade recovery expected in 2017 and 2018, amid policy uncertainty- Press/793". www.wto.org. Retrieved 2017-09-13.
  6. ^ "US overtook China as top trading nation in 2016- Nikkei Asian Review". Nikkei Asian Review. Retrieved 2017-09-13.
  7. ^ "China Overtakes Japan as World's Second-Biggest Stock Market". Bloomberg.com. 2014-11-28. Retrieved 2017-09-13.
  8. ^ Cheng, Evelyn (2017-08-21). "Global funds expanding into massive Chinese investment market". CNBC. Retrieved 2017-09-13.
  9. ^ a b c Commission, Australian Trade. "Insight - The future of Australian finance in Chin". www.austrade.gov.au. Retrieved 2017-09-13.
  10. ^ Group, Mark Mobius | Executive Chairman, Templeton Emerging Markets (2012-10-16). "The ABCs of China's Share Markets". CNBC. Retrieved 2017-09-14.{{cite news}}: CS1 maint: multiple names: authors list (link)
  11. ^ "A-Share/B-Share Markets Definition from Financial Times Lexicon". lexicon.ft.com. Retrieved 2017-09-14.
  12. ^ "Shanghai Stock Exchange". www.ssc.cn. 2017-09-14. {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  13. ^ "Shenzhen Stock Exchange". www.szse.cn. Retrieved 2017-09-14.
  14. ^ a b Survivor, Team Wall Street. "Investing in China: Trends You Need To Know - Wall Street Survivor Blog". blog.wallstreetsurvivor.com. Retrieved 2017-09-18.
  15. ^ a b c d "China's Competitive Advantage in the Global Market". ToughNickel. Retrieved 2017-09-18.
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