Third plenum charts path for reforms in China's financial market, as doors are opened wider to welcome foreign institutional investors

BEIJING, Aug. 21, 2024 /PRNewswire/ -- Global investment management company, Allianz Global Investors, recently launched its first equity investment fund in the Chinese market, joining dozens of foreign financial institutions that have expanded their footprints in China after the Third plenary session of the 20th Communist Party of China Central Committee, held in middle July, set the direction for future reform in the financial sector.

Boosted by a strong signal of deepening reform and widening opening-up and promoting high-quality economic development, multiple foreign financial institutions have expressed their optimism to the Global Times about the sound long-term growth prospects of China's economy including the capital market, while showing eagerness to expand their operations in the Chinese market in order to reap more fruitful dividends. 

Future growth prospects

"We are very optimistic about the development prospects of the Chinese economy, especially considering that foreign trade picked up in the first quarter and the import and export volume has hit a record high, which will inject strong impetus into the steady growth of the economy throughout the year," Ginger Cheng, CEO of DBS China, told the Global Times.

DBS raised its growth forecast for Chinese economy this year to 5 percent from 4.5 percent in April.

"With China's steady economic growth, the country remains an attractive destination for foreign investment, especially in scientific research and technological innovation, energy transition, pharmaceuticals, and consumer goods," she said, noting that the bank will invest in sectors and industries that benefit from China's economic growth and the continued recovery of broader consumer optimism. 

On August 1, the Standard Chartered Bank (China) formally opened a private wealth management branch in Beijing's CBD that will provide multidimensional services for China's high-net-worth families, while UBS Futures, a wholly-owned subsidiary of UBS Securities in China, celebrated its 10th anniversary recently. 

As the first foreign financial institution in China to obtain the Qualified Foreign Institutional Investor (QFII) status, UBS looks forward to further leveraging its strengths to deepen its cross-border business, assisting international investors to participate in China's futures market, as well as utilizing its global resources to contribute to the high-quality development of the local futures market, Qian Yujun, chairman of UBS Securities, said in a press note shared with the Global Times.

The arrival and expansion of a growing number of global financial institutions in China not only highlights the country's commitment to opening up its finance industry to international players, but also underscores the confidence shared by global institutions in China's sustainable development of the new quality productive forces and the great potential it holds, Bian Yongzu, executive deputy editor-in-chief of Modernization of Management magazine, told the Global Times on Thursday.

Over recent years, China has rolled out more than 50 measures to expand financial opening-up, including scrapping foreign ownership caps in the banking and insurance investment sectors, and cutting access thresholds for foreign investors, according to the National Financial Regulatory Administration (NFRA), the top financial sector regulator. 

As of January, 24 foreign Global Systemically Important Banks (GSIB) had established branches and representative agencies in China and nearly half of the world's top 40 insurance companies had entered the Chinese market, data from the NFRA showed.

"China's capital market has witnessed some breakthroughs in recent years, with the capital market structure much improved, underlying the progress of the country's reform in the financial sector," Bian said, displaying his confidence in the country's capital market.

Bian noted that there is room for improvement to strive for high-quality development of China's capital market, for example, the yields for investors remain undesirable and major stock indexes cannot reflect the economic development. Bian called for the rollout of structural reforms as well as new laws and regulations to help upgrade the market. 

Commitment to opening-up

The reform-themed Third plenary session, which is often referred to as the "third plenum," emphasized that reform of the country's financial markets, sending a strong signal that China is earnest and steadfast in reform and opening-up.

China will facilitate foreign equity investment and venture capital investment in China, according to the resolution adopted at the third plenum.

"We will improve the management model based on pre-establishment national treatment plus a negative list and support qualified foreign capital institutions in participating in our financial service trials. We will expand the connectivity between domestic and overseas financial markets in a steady and prudent way and improve the qualified foreign institutional investor system," the document reads.

After the third plenum, Chinese government agencies are actively taking steps to further promote the country's opening-up, targeting the capital market and financial sector.

While chairing a symposium in Beijing in late July with foreign financial institutions, Wu Qing, chairman of the China Securities Regulatory Commission, said the commission is studying and planning a package of new initiatives to further deepen reforms and opening-up of the country's capital market.

It is hoped that foreign financial institutions can leverage their advantages and their role as a bridge connecting with the global market, stick to their long-term development strategy in China, Wu said.

"In addition to improving connectivity with foreign capital markets, Chinese regulators will unify existing market access and settlement systems. The Chinese government is exploring and establishing inclusive institutional arrangements compatible with a multi-level custody system. This will enable overseas institutional investors to entrust qualified local custodians for bond custody directly, or through their global custodians in the future," Cheng from DBS China, said.

DBS China is well positioned to participate deeply in the development of China's financial market, coordinating the resources and networks of DBS Group worldwide to provide differentiated financial support for the development of new quality productivity forces in China, Cheng said.

SOURCE Global Times