ANALYST VIEW: CHINA AND GREATER BAY AREA
China has set up new schemes that will entice foreign financial firms to enter the market
China’s new foreign-friendly financial market laden with opportunities
If authorities remove the execution-only restriction in Wealth Management Connect, money flows in the channel could grow 10x bigger, says Ernst & Young’s Christine Lin.
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hina opening up its trilliondollar financial market to foreign firms is cause for much celebration, but that’s not to say that everything is smooth sailing: more foreign firms may be taking a waitand-see approach following China’s ongoing regulator crackdown. In 2020, China moved to open its financial market overseas, easing restrictions in foreign ownership and finally allowing wholly foreign-owned financial institutions to the country. Foreign firms have much cause for celebration: the revised regulations open up a US$48t-market, as noted by an American think tank Peterson Institute for International Economics. Already, non-Chinese firms are making waves, with the most notable of them being the asset manager, BlackRock China, whose equity fund raised $1b in its maiden mutual fund just days after it launched in August last year.
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China has also set up a number of new schemes that will definitely entice foreign financial firms to enter the market, chief of them being the Wealth Management Connect (WMC), which offers opportunities for financial institutions situated in Hong Kong to offer investment products to millions of investors across the Greater Bay Area (GBA). That’s not to say that everything is smooth sailing: the recent regulatory crackdown in China–which has affected even the country’s biggest financial players, a chief example being Ant Group’s suspended 2020 IPO— may have driven some foreign firms to take a wait-and-see approach before diving into the Red Dragon’s financial market no matter how enticing it is, noted Christine Lin, Financial Services Assurance Leader and Wealth & Asset Management Sector Leader for EY Hong Kong. In regards to WMC, restrictions
Recent regulatory crackdown in China may have driven foreign firms to take a wait-and-see approach
in the scope of activities that can be done under the channel are deterring growth–restrictions which, if removed, could drive money flows within the channel to be much bigger than the US$22.5b (RMB150b) quota set by authorities, Lin told Asian Banking & Finance. “[One] of the restrictions is that the banks in Hong Kong, for example for the Southbound, can do “executiononly.” This means that the bank cannot make recommendations to the fund managers on different funds or investments,” Lin explained. And how big could it grow? “When you look at the population of Hong Kong and the GBA, we’re talking about 7.8 million and 71 million, respectively. If you just talk about that, 10 times, definitely,” Lin said. “So if you have to ask me to put a number on it: 10 times.” Asian Banking & Finance spoke with Lin to find out more about what’s
