Foreign Investment in China’s Capital Market on the Rise
Data from the China Securities Regulatory Commission shows that a total of 81 institutions have been approved as qualified foreign institutional investors (QFII) in 2023, covering 15 countries, regions and international organizations around the world. This recent surge in approvals is second only to the 118 in 2021.
According to experts, the increase in the number of QFII approvals reflects the growing confidence of foreign investors in China’s macroeconomic and capital market development prospects, which bodes well for the high-quality development of the country’s capital market.
As of the end of 2023, 802 overseas institutions have been approved as qualified foreign investors, mainly overseas pension funds, sovereign funds, public funds, securities companies, insurance companies, and commercial banks. These institutions have become important institutional investors in China’s capital market.
A research report released by CICC in August 2023 shows that foreign investors mainly allocate A-share assets through the QFII/RQFII (Renminbi Qualified Foreign Institutional Investor) and Southbound Stock Connect mechanisms. This further demonstrates the strong interest and confidence from foreign investors in China’s capital market.
Tian Xuan, deputy dean of Tsinghua University PBC School of Finance, believes that foreign institutional investors are accelerating their deployment in China’s capital market due to the continued recovery of the country’s economic vitality. Additionally, the historically low valuation of the A-share market is seen as more attractive in the long term compared to overseas markets.
The positive outlook on China’s economic growth in 2024 by foreign institutions, such as Goldman Sachs and JPMorgan Chase, further enhances the attractiveness of China’s capital market to foreign investors.
As an important measure for the opening up of China’s capital market, the QFII system has been continuously optimized and improved in recent years, playing a positive role in introducing overseas long-term funds, optimizing investor structures, guiding value investments, improving the governance of listed companies, and promoting the internationalization of the RMB.
Experts generally believe that the continued “entry” of foreign institutional investors will have a multitude of positive effects on promoting the stable and healthy development of China’s capital market. Foreign-funded institutions are expected to contribute to the market liquidity, governance of listed companies, and market maturity.
To attract more foreign investment institutions, there are calls to improve the quality of China’s listed companies and to deepen capital market reform while providing a clear, stable, and predictable market environment for foreign investment. The emphasis is also placed on promoting high-level financial openness and ensuring national financial and economic security. These measures aim to attract more foreign financial institutions and long-term capital to develop businesses in China.