China's capital market draws foreign investment amid opening-up

BEIJING -- China's capital market, boosted by cranked-up policies and measures on opening-up, will continue to attract foreign investment in the second half of this year, analysts from investment banks and securities companies predict.

Posting striking performance in the first half the year, the capital market logged an accumulated net inflow of northbound funds worth 183.32 billion yuan ($25.44 billion) during the period, compared with about 71.8 billion yuan in the same period last year, data from the financial information provider Eastmoney.com shows.

With an optimistic economic outlook for China, as well as strong appeal derived from considerable growth space in China's capital market and the country's ambitions to further open up the capital market, foreign investment is expected to pick up steam in the second half of the year, analysts believe.

China's cyclical growth momentum is expected to strengthen in the second half of the year, investment bank Goldman Sachs predicts. The investment bank expects overseas funds to up their investment ante in the Chinese stock market when investor sentiment improves following the introduction of favorable policies.

The shares of Chinese stocks currently held by overseas funds are still at a low level, while the risk appetite of the foreign funds toward China exposure is higher than the historical average, it adds.

Speaking at the Lujiazui Forum held in Shanghai last month, Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC), said that China will adhere to the fundamental policy of opening up and unswervingly promote the "all-round opening-up" of markets, institutions and products.

Fang Xinghai, vice-chairman of the CSRC, said China will continue to steadily expand the opening up of specific futures varieties, broadening the scope of the dollar-denominated qualified foreign institutional investor scheme (QFII) and its yuan-denominated sibling, RQFII.

In the latest policy measures to further open up its capital market, China will allow foreign financial institutions in eligible free-trade zones to provide similar services as their Chinese counterparts, the State Council said in a circular released on Thursday.

In fact, foreign institutions have continually increased their presence in the Chinese market as China scrapes ownership caps for them in certain areas of business, including securities, futures and funds. Earlier this year, the CSRC granted fund management company Schroders a public offering license.

Zeng Gang, deputy director of the National Finance and Development Laboratory, said that, once they have been implemented, the measures will facilitate the business innovation and development of foreign financial institutions in China.