There is nothing wrong with thinking that technology will stay in the course of development with the same momentum. Andy Samu in the Disruption Banking piece has looked at the Chinese market and provided us with an interesting analysis of this phenomenon.
Chinese Ant Group, although may sound unfamiliar, is in fact a big company providing mobile payment services in China, as it owns Alipay. Its estimated value is around $250 billion and upon its debut in Shanghai and Hong Kong, it was looking to raise $35 billion IPO by late October 2020.
Chinese economists must be aware of the fact, that when technology meets capital markets, we can witness a rise of the colossi like TESLA or Nasdaq. Chinese regulators will want to make use of that, and we can expect resolute actions from them.
China’s ways to encourage investors
We have been recently witnessing China’s regular statements that are issued by the China Securities Regulatory Commission (CSRC), USUALLY featuring its Vice Chairman, Dr. Fang Xianghai. He has been expressing Chinese sentiments towards recent openness shown to the People’s Republic of China by different foreign financial institutions.
Back in August 2020, Dr. Xinghai gave an interview, where he dwelled on his team’s and CSRC’s efforts to reach out to the US, with the focus on organizations like PCAOB (Public Company Accounting Oversight Board). He insists that the financial “decoupling” of America and China serves nobody.
Back in September, Citi became the first bank from the United States that was “Approved for Business” on the Chinese market, which is certainly amazing news for Citi officials. It may be a great step not only for the bank but also for the whole world, as the Chinese market has been unavailable for a long time.
Later, American Express and BlackRock have also been approved by the People’s Bank of China, meaning they will now be able to develop their businesses in the country, while Vanguard is making the first steps towards establishing its office in Shanghai.
The need to open up for offshore investors
Not long after that, we could hear from Dr. Xinghai again, when he spoke at the 2020 China International Annual Forum. Once again his message was really straightforward, as he revealed, that non-Chinese investors hold $294bn worth of stocks. That, plus all other forms of investment, makes up only 4.69% of the Chinese stock market.
After comparing that to Japanese and Korean 30%, it becomes clear, that there is a lot of space to expand on the Chinese market. To reach the above-mentioned neighbors’ marks, almost $1.9tn would have to be pumped into the Chinese market by offshore investors.
Fang also discussed the revised rules of QFII (Qualified Foreign Institutional Investor) and commented on the importance of commitment to tightening the two nations’ cooperation in years to come.
The event coincided in time with China Banking and Insurance Regulatory Commission fining five financial institutions with the penalties adding up to a total of Rmb 320m ($47m). They were punished for allegedly providing financing to the unqualified projects concerning real estate, as well as selling illegal wealth management products. They are also said to have been providing related parties with offers of credit loans.
That means that Chinese regulators are not afraid to penalize homegrown firms and institutions, and that certainly gives the rest of the world a sign that things might be going in a good direction there.
What are we supposed to expect from China?
According to Andy Samu, we will not have to wait much longer for other household names to start appearing in the market, as Chinese regulators will gladly examine their requests. According to several companies like Sanford C. Bernstein, Morgan Stanley, or Macquarie Group Ltd., we might be witnessing the dawn of the Chinese market’s large gains. Samu calls it the “momentum exhaustion”, and of course there will be some exceptions, and China Ant Group’s IPO may be one of its indicators.
We need to remember, that this financial situation is highly dependent on the political one. Not long ago did the American authorities aggressively punish Chinese firms like TikTok or WeChat. For now, we can not say the same the other way round, but nobody knows what the future will bring.
The main source of the preventive actions is supposed to be the “national security” and protection of users’ data both in China and in the US. Both sides’ governments collaborate with tech firms, and both governments fear the others’ collaborations.
As we can read further in Andy Samu’s piece, this may be the main reason for the political reluctance to the other side’s technological advancements. The Disruption Banking article then analyses new CSRC rules, that are supposed to facilitate foreign investors’ actions. For more, we invite you to visit the original piece: https://disruptionbanking.com/2020/09/29/approved-for-business-in-china-and-ant-groups-35-billion-ipo/