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September 18, 2019

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Investors’ confidence in China stays robust

Investors’ confidence in China remains robust and the case for investing in China continues to be strong, thanks to the efforts of the country’s regulators and efforts to liberalize the capital market, according to a Standard Chartered Bank survey.

Gathering responses from 131 investors, regulators, custodians and brokers from across Asia, Europe and North America, the survey found 86 percent of respondents are investing in the world’s second largest economy, including all respondents from the US.

Most respondents expect to increase their investment in 2020 while 63 percent consider the Chinese market as the top 3 priority in the world.

“Since China began opening up its capital markets in 1992, the country’s concerted approach to liberalization has gradually won the confidence of international investors. This year we found investors continued to focus very strongly on China,” said Margaret Harwood-Jones, the bank’s global head of securities services.

While there has been some moderation in investor sentiment, this can be mainly attributed to rising Sino-US trade tensions, which have rattled markets across the world and caused a short-term pick-up in China’s capital outflows, the UK lender noted.

More positively, however, regulatory barriers to foreign investment are falling and index inclusion is gathering pace for both equities and bonds.

One driver of investors’ confidence is the efforts of Chinese regulators and exchanges over recent years to liberalize its market access.

For example, only around a quarter of respondents are concerned about regulatory uncertainty in 2019, down from 43 percent last year.

Investors seek to gain access to the broadest range of onshore assets, according to the study. Wholly owned foreign enterprises will be key to investors’ China strategies, with 45 percent of respondents either having or planning a WFOE.

However, the survey found investors wanting a better market infrastructure to help them manage foreign exchange risks, with 29 percent citing it as their top concern, second only to the US-China trade tensions at 38 percent.

In addition, index inclusion has yet to deliver the expected inflows to onshore assets, with only 11 percent respondents indicating that inclusion influenced their decision to invest.


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