HK investors eye opportunities in Shanghai FTZ

On Monday and Wednesday, the People's Bank of China - the country's central bank - published documents on financial reform related to the Shanghai FTZ. The regulator encouraged outbound investment and said it will allow companies to issue bonds in overseas markets. It will also allow residents and non-residents in the zone to open accounts and invest in foreign securities markets.

"As mainland capital is being invested outside, Hong Kong companies have a greater chance of supporting those overseas activities. Hong Kong has all kinds of middlemen such as financial consultants, lawyers and investment banks, which can help to find the right targets for mergers and acquisitions and see through the process smoothly," said Chan.

"From 2002 to 2010, Chinese enterprises' overseas acquisitions focused on strategic resources such as oil companies and mines. But in the past three years, the wind has changed," said Chan. "M&A deals in the high-tech sector are developing very fast. The further loosening of controls for domestic outbound investors in the free trade zone will increase the footprint of Chinese companies around the world."

However, Chinese investors face significant resistance globally since the country has yet to sign the latest bilateral investment treaty with the US, said Sung Yun-wing, co-director of the Shanghai-HK Development Institute and professor of economics at the Chinese University of Hong Kong.

Sung added that at the current stage, foreign investments on the mainland have to be approved case by case, which means the authorities have the right to reject investors.

Sung expressed hopes that the so-called "negative list" used in the Shanghai FTZ, a list released by authorities that blocks or restricts foreign investment in some sectors, will be shortened in coming years.

"Though now the 'negative list' nearly echoes the regulations on the mainland, we are looking forward to a shorter list in 2014 and the years beyond."