China investor survey 2020: LEADING THE GLOBAL ECONOMY OUT OF SLOWDOWN

The company which did the research report - Standard Chartered

About the company - Standard Chartered plc is a British multinational banking and financial services company headquartered in London, England. It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority.

Area of research - The survey reveals how investors view the China market, their investment plans, China investment strategy and use of access channels. It also highlights the driving factors behind their strategy for investing in the Chinese market.

Name of the organization which did the survey - A Funds Europe survey in partnership with Standard Chartered.

Funds Europe is the leading journal for the cross-border funds business. Each month one can find detailed coverage of the funds’ industry, spanning Ucits, alternative investment funds and ETFs. They are unique in covering the full life-cycle of funds, from investment strategy and economics to regulation, asset servicing and post-trade services.

Participants of the survey - In all, 139 market participants responded.

Duration of the research survey - The 2020 China Investor survey was conducted by Funds Europe between June and August as an online survey sponsored by Standard Chartered. 

The main points of discussion in the survey:

1. China’s importance as an investment market

2. Ease of access a priority for investors

3. The shift in drivers reflects infrastructure developments

4. Access channels

5. Index inclusion

6. JVs and WFOEs

7. The rising importance of actively managed funds

Findings of the survey:

1. Investment in China is a long-term strategy for foreign investors, notwithstanding the current global economic slowdown and geopolitical tensions, particularly US-China relations. More than 90% of respondents say that the importance of China continues to rise in their investment strategies, with 17% of these saying that China holds top priority in their investment strategies. Only 1% say that the importance of China has declined over the past year notwithstanding US-China trade tensions and global economic uncertainty associated with the Covid-19 pandemic.

2. China’s regulators have taken steps to streamline the QFII and RQFII programmes and to broaden access to China’s domestic bond markets through China Interbank Bond Market (CIBM) Direct. This has been a prime factor driving respondents’ decisions to invest. In China: 69% highlight ease of access to onshore channels and 63% highlight ease of access to offshore channels. 

3. While the survey highlights a positive outlook for China-bound investment, it finds that 65% of respondents are monitoring economic and political developments closely. Respondents also point to US-China trade tensions (50%), regulatory uncertainty (31%) and the need for transparent financial reporting and accounting standards (22%) as primary factors that are shaping their decisions about when, and how much, to invest in China.

4. The survey affirms the position of Stock Connect and (more gradually) Bond Connect as access channels of choice for many international asset managers and institutional investors, offering simple registration and fast entry for those who previously found it challenging to execute their investment ambitions in China through the QFII or RQFII schemes. Despite economic disruption created by the coronavirus pandemic, the Stock Connect access channel generated record revenue of HKD743 million (approximately US$95 million) during the first half of 2020, a 46% rise on 1H 2019. Additionally, investors prioritize the availability of investment quota (44%) and the speed and simplicity of application and account opening (43%).

5. Asked when they expect China to be fully included in the MSCI EM Index with 100% weighting based on market capitalization, 42% of respondents anticipate this transition is likely within 24 months. However, just over a quarter of respondents believe this will take 48 months or longer. Only 13% believe this is imminent within a year. Index inclusion has resulted in high trade volumes through Stock Connect.

6.  53% say they have already established a wholly-owned foreign enterprise (WFOE) in China or plan to do so in the future. While 42% of asset managers with a joint venture (JV) in China say that they have taken a majority stake in their JV or will do so in the future and 38% say they do not expect to change their current JV arrangements.

7. 38% of respondents say that actively managed fund products are central to their investment strategies in China at the current time. This figure will rise to 63% in two years, with respondents predicting a surge in the importance of actively managed fund products for foreign investors in the Chinese market. These survey results reflect China’s continuing growth to become the fifth-largest mutual fund market worldwide with assets in excess of US$2 trillion as of August 2020. Money market funds (MMFs) account for roughly half of China’s mutual fund assets, with retail investors accounting.

8.  The survey indicates that foreign institutional investors are prepared to increase their inbound allocations through passive investment products (rising from 25% at the moment to 34% in two years).

9. Respondents attached the highest priority to the revocation of quota restrictions for QFII/RQFII (known as QFI after November 1, 2020) and then to the extension of block trading facilities on Stock Connect. Effective from September 1, 2020, CFETS also extended the opportunity for bond investors in CIBM Direct to trade across multiple counterparties via a request-for-quote (RFQ) mechanism based on quotes provided by market makers in the CFETS system.

10. Moreover, driven by market liberalisation and solid yield opportunities, China’s equities and bond markets have become the second-largest worldwide. Foreign holdings of China onshore financial assets increased to RMB7.18 trillion (approximately US$1.07 trillion) at the end of 2020.

11. On May 5, 2020, the PBoC and SAFE issued Regulations on Fund Administration for Domestic Securities and Futures Investments by Foreign Institutional Investors. In September 2020, PBoC, CSRC and SAFE released the Measures for the Administration of Domestic Securities and Futures Investment by QFII and RQFII (‘the Measures’), which included steps to consolidate QFII and RQFII schemes and to lower eligibility requirements.

Conclusion: Now in its fifth year, our annual survey takes a closer look at investors’ latest strategies in China, reflecting on the current economic and political climate, their thoughts on different access schemes and how these are continuing to evolve, as well as the challenges and opportunities which lie ahead through the most recent liberalisation wave.

China will continue to push forward with its market-oriented opening up. With this, and with the differences in economic performance and bond yield between the East and West, investment flows into China are expected to accelerate over the coming 12 months.

1. 59 % say they will increase their allocations to Chinese assets during the coming 12 months. 
2. 54% say asset class coverage is the most important factor in selecting an investment channel to access the Chinese market.
3. 38% currently use actively managed mutual funds to provide exposure to China, but this will rise to 63% over the coming two years.

Questions :

1) The study was done by?

1. Standard chartered
2. Global markets
3. Societe generale
4. Synchrony

2) What is the title of the study report?

1. Achieving financial goals
2. Climbing the prosperity ladder
3. China investor survey
4. Economic growth

3) What kind of services is provided by Standard chartered plc?

1. Auditing
2. Human resource
3. Banking and financial services
4. Investment policies

4) When was this survey conducted?

1. 2020
2. 2017
3. 2018
4. 2019

5) Who did the survey?

1. Standard chartered
2. Funds Europe
3. Societe generale
4. Synchrony

6) What year was it for them to do the survey?

1. Second
2. Third
3. Fourth
4. fifth

7) Which of the following point is not viewed by the survey?

1. China market
2. China’s investment plans
3. China’s use of access channels
4. China’s living standard

8) How many market participants responded?

1. 139
2. 200
3. 150
4. 100

9) What % of respondents said that the importance of China continues to rise in their investment strategies?

1. More than 50%
2. Less than 50%
3. More than 90%
4. More than 60%

10) What is considered to be the prime factor attracting investors?

1. steps are taken to streamline the QFII and RQFII programmes
2. actively managed fund products
3. increasing inbound allocations
4. foreign institutional investors

11) ____% of respondents are monitoring economic and political developments closely.

1. 50%
2. 65%
3. 45%
4. 34%

12) Who’s position as access channels of choice who previously found it challenging to execute their investment ambitions in China through the QFII or RQFII schemes are being offered simple registration and fast entry?

1. Foreign investors
2. Stock Connect and Bond Connect
3. Retail investors
4. Joint ventures

13) _____ has resulted in high trade volumes through Stock Connect.

1. Stock Connect and Bond Connect
2. Retail investors
3. Joint ventures
4. Index inclusion

14) ____% of respondents say that actively managed fund products are central to their investment strategies in China at the current time.

1. 42%
2. 50%
3. 38%
4. 20%

15) Foreign institutional investors are prepared to increase their inbound allocations through _____ products.

1. Index inclusion
2. Joint ventures
3. Retail investment
4. Passive investment

16) China’s equities and bond markets have become the _____ largest worldwide.

1. First
2. Second
3. Third
4. Fourth

17) 59 % say they will increase their allocations to Chinese assets during the coming ___ months.

1. 12
2. 24
3. 18
4. 34

18) 54% say ____ is the most important factor in selecting an investment channel to access the Chinese market.

1. Index inclusion
2. asset class coverage
3. joint ventures
4. stock connect and bond connect

19) What % change is expected in two years for the managed mutual funds to provide exposure to China?

1. 23%- 45%
2. 38%-63%
3. 43%-67%
4. 34%-78%

20) US-China trade tensions and the new national security law in Hong Kong, indicating that these risks ____ substantially weaken the secular case for cross-border investment into China.

1. Do
2. Do not
3. May
4. will