MR & RQFII: China’s catalytic converters

An investment in China isn’t just a bet on growth. It’s also an investment in change.

The mutual recognition (MR) scheme for Chinese and Hong Kong-domiciled funds will debut soon, adding its opportunities to a menu of cross-border access programmes and drawing particular attention to the Hong Kong-Mainland nexus. New flows of funds, moving through new routes and occasionally into lightly-explored markets – such as China’s exchange-traded bonds – create new challenges for everyone in the transaction banking ecosystem. At the same time, as interconnectivity of the Hong Kong and Mainland markets deepens, the investor base that their movement attracts is widening: ripples from RQFII’s early moves have already been felt in London, Luxembourg, New York and Tokyo.

For investors who wish to enter this growing market, or gain finer control over their exposures within it, they will need to either develop these building blocks of market perspective on their own, or find a partner which already has them in place. This is not merely a problem for future consideration: 50 per cent of all non-RMB bond issues in Asia this year are going to be Chinese in origin. A good partner, therefore, must offer both local depth and global reach.

The addition of yet more access channels to the Mainland verifies that constant change will continue to define the China marketplace. Challenges faced by MR and RQFII participants extend beyond imminent policy changes; the keystone decision will be the selection, now, of their local team – their bank partners on-the-ground. At Standard Chartered, we have managed our Asian legacy, our local business practices and our China information networks to make ourselves the best possible strategic advisors to clients. Constant developments to cross-border access programmes are opportunities for those investors to reconsider who they want as a partner in China and why.

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