CITIC Capital interview: Challenges in opening up

How did you start your legal career

Quite fortuitously, as I started shortly after September 11. Asia's economic conditions were not spectacular back then and I started my first position in, understandably, insolvency and restructuring in Singapore. As the market picked up, I cut my teeth on the Chinese capital markets, by doing the first few listings of Chinese companies on the Singapore Stock Exchange. Subsequently, I obtained my LLM at Cambridge and my MBA from the University of Chicago. Prior to joining CITIC Capital, I was at APG Asset Management Asia, one of the largest institutional investors globally and I am very grateful to have found my current position at CITIC Capital.

What is your role at CITIC Capital

I am the head of legal and compliance as well as the company secretary for CITIC Capital, where I am responsible for covering the legal, compliance and execution functions of the company's various business lines. These range from private equity transactions, real estate, venture capital, natural resources and other types of structured financing transactions. One of the more unique aspects of CITIC Capital is its mixed culture where we have a very local Chinese background that is coupled with the internal mind-set. Our Chinese background allows us to better understand and coordinate with the workings of the Chinese regulatory and economic backdrop. Our global experience allows us to better grasp the requirements of international investors for corporate governance and other market-standard best practices. This combination adds to the level of complexity of my work in terms of regulatory understanding as well as the need for cultural sensitivity.

These past few years have been very fortunate for us – we have been involved in some of the most exciting and landmark PRC deals such as the privatisations of AsiaInfo, FocusMedia and Alibaba, as well as the investment into SF Express.

What is driving China's capital markets What are the latest trends

I would say that the Chinese capital markets are slowly but surely evolving. For sure, the domestic stock markets have been always been choppy and there is still the issue of the so-called “IPO queue” where primary domestic listings are still hard to achieve. While there has been talk of market liberalisation, one can best say that, as with all things in China, the reform is an on-going process but it is a step in the right direction. It is clear the China Securities and Regulatory Commission (CSRC) is focused on achieving reform and developing long-term institutional investors for the Chinese markets. Although such efforts are evident in the relaxation of certain requirements in a bid to attract more institutional investors to the domestic markets, many practitioners still lament that reform is not sufficient or happening quickly enough. It is our impression that the Chinese regulators are typically cautious in making reforms.

This year, the CSRC helped to liberalise the Chinese domestic asset management industry with the budding growth of the Asset Management Association of China (AMAC). AMAC has more recently pursued proper development of the local asset management industry through diversification.

Another trend that we have observed is the relaxation of capital controls, beginning with the promulgation of the various free trade zones throughout China, such as in Shanghai. The government recognises the need to better deploy capital other than through the usual channels of investment and has permitted more liberalisation in outbound capital flows. We expect this trend to continue for years to come.

Requirements have been lowered for offshore financings, where it has become relatively easier to source and pledge collateral. This facilitates the outbound flow of capital where Chinese institutions seek to acquire targets overseas.

What more needs to be done for China's capital market

It is clear the regulators recognise that the Chinese capital markets need further reform – specifically, expanding the avenues of financing beyond just equity and into other areas like debt financing. There is also the need to institutionalise other areas of the financial markets, such as the trust and alternative investment industry, and to bring them in line so as to ensure macro-economic stability and investor protection. The regulators are gradually deepening the investor pool in order to achieve a profound and functioning capital markets and serve the needs of the Chinese economy.

Given these various goals, it takes time and patience for the reforms to be implemented, and, more importantly, to take effect. It is important to bear in mind that the Chinese capital markets, in their current form, are still very nascent and credit must be given to the Chinese regulators for taking the steps in the right direction to allow the markets to grow.