Building the blocks for funds in China

by Philippe Seyll, Co-CEO of Clearstream Banking


I’ve recently read that Luxembourg-based UCITS fund managers will now be able to invest into the Chinese Interbank Bond Market via channels like our China Bond Link. Combined with the launch of the Shenzhen Hong Kong Stock Connect programme on 5 December, we’re now entering a period where the full range of onshore Chinese fixed income and equity instruments are available to UCITS fund managers.

What’s interesting here is the symbiosis of international and domestic Chinese objectives. On the one hand, Chinese regulators are keen to encourage more international institutional investors such as UCITS funds to invest in Chinese assets, and particularly equity. On the other hand, exposure to the Chinese market is of increasing relevance to international investors, for all of the reasons my colleagues Phil and Berthold have mentioned in their earlier blogs.

But what about Chinese domestic Funds?

In China, the fund industry is still very much in a nascent stage – but moves like the above are sure to add impetus to its development. A study by my colleague Tilman Fechter went into further detail on the development of Asset Management in China, particularly in the context of the Mutual Recognition of Funds programme. By interviewing senior decision makers from leading international asset managers, Tilman found that all survey participants rated China as important or the most important market. Tilman’s research highlighted though that time will be required for domestic investors to gain familiarity and comfort with funds, since they are relatively new products in China.

My key take-away – also on reflecting my own conversations with customers - is that there is indeed a market for international asset managers and their products, although it will take a few years to come to full fruition. As such, it is well-advised to international players to start or continue their strategic positioning and concrete market entry strategies, as it is not so much a question of "if" there will be a demand for such products in China, but more of "when".

At Clearstream, meeting our customers’ increasing demand to invest in China has long been one of our key objectives. Along our way of strengthening Clearstream’s ties with the Chinese market, providing easier access to Chinese assets via Vestima is a key aim.