The Investor's Guide to Betting on China in 2020

China opens its doors to new overseas investment in its booming asset management industry; a thorough overview for foreign investors

Author: Jennifer Chan   

The cold war between the world's two largest economies has lasted two years and sees no end as sides find new points of conflict and construct new walls which may take longer to break than they did to build. The outbreak of Covid-19 only made things worse. But while some nations around the world are closing their doors to foreign investment, China is opening up, offering overseas asset management firms a unique opportunity to capitalize on China's growing wealth. 

Indeed, China is defying the rise of financial and economic nationalism by providing more opportunities for foreign investors than perhaps ever before. Hit hard by the coronavirus in the first part of 2020, China is roaring back and investors around the world might want to bet once again on its $45 trillion financial markets.

Just over the weekend, China's central bank officially greenlighted American Express Co. (NYSE: AXP) – the U.S. bank became the first foreign institution to receive such a license. Earlier, on April 1, 2020, China officially lifted restrictions on the proportion of foreign shares held by securities companies and fund management companies. The move was originally scheduled for December 2020. Numerous foreign financial institutions have recently settled in Beijing, with asset management institutions including private equity management companies accounting for a considerable proportion.

Elisa Ng, head of China and Hong Kong Funds at J.P. Morgan Asset Management, said, "The current low or even zero interest rate environment across developed markets has made it more challenging for investors to find yield opportunities, making the income potential of China bonds more appealing," as cited by the International Investment.

Asset Management Industry Ascends

Within the global financial industry, asset management is one of the fastest-developing sectors, representing approximately 25% of the total global financial assets. The total size of global asset management reached a record high in 2019, doubling that of a decade ago. Asset management is an important engine of capital markets development, and nowhere is this more evident than in Beijing's booming asset management industry. Spurred by the vast accumulation of personal and familial wealth in the world's second-largest economy, market demand for asset management is growing at a rapid rate. 

This large and now more open market has attracted the attention of global asset management institutions which are now racing to allocate assets and establish a presence in the country. An excerpt from the "Beijing Guidebook for Overseas Asset Management Institutions" whose full report can be viewed by clicking the link below, states:

"Overseas asset management powerhouses are accelerating their entry into China, while the local asset management sector is speeding up its development into a mature international model. Beijing is one of the most developed asset management markets in China and is notable for its high concentration of asset management institutions. By the end of 2018, the total asset under management (AUM) of Beijing-based financial institutions reached to RMB 148 trillion, capturing 50% of the total AUM in China. The total AUM of banks, insurance companies, securities firms, fund management companies, private fund managers, and trusts is around RMB 33 trillion, ranking the highest in China."

See the link for the detailed report: "Beijing Guidebook Overseas Asset Management Institutions"