Shanghai opportunities coming for savvy investors

Shanghai-based Allen & Overy partner Ji Zou agreed: “This is definitely going to be another big move of the Chinese government to expand the investment channels for overseas investors and even allow them to share the renminbi appreciation.”

Li noted however that it was unclear when this expected 'policy' would be codified and implemented. Additionally, the new policy would take time to
mature.

Despite initial uncertainties, Zou encourages foreign investors to participate once the new system is formalised and they are familiar with the policy: “They can view this as a good opportunity to set market precedent for the new areas in the financial industry by being one of the pioneers.”

Zou said the success of the policy would eventually depend on the authorities' determination to enforce reforms in other related areas, such as providing more innovative financial products, further opening up the financial markets and liberalising foreign exchange controls.

Foreign investors are increasingly looking for new growth points of the Chinese economy, said Zou. “Growth areas can be reflected in new financial products and industries that attract capital such as renminbi denominated funds, green energies and natural resources.”

Renminbi is not convertible under the capital account. The only reliable means to access China's capital and financial markets are through the QFII programme, M&As and foreign direct investment.

“Foreign investors are missing a party but they are not really missing a whole lot,” said Li.

“There is a dearth of financial products to invest in, even for domestic investors. This coupled with high domestic liquidity results in a high degree of speculation in many investment channels such as the domestic stock and real estate markets.”