Six takeaways from the China Finance Forum

From pandemic recovery to political decoupling, the conference covered a wide range of topics, six of which stood out.

1. The development of EU-China relations is essential

This sentiment ran through the entire speech, but was presented most concisely by the founder and director of the Peterson Institute for International Economics, Dr. Fred Bergsten. Setting the context for relations between China, the United States and Europe, the professor explained that while China and the United States are vying for the role of supreme economic power, the EU should not follow the United States. United in their efforts to dissociate themselves from the United States.

“Functional decoupling”, as he called it, would allow the EU and China to cooperate on financial and economic issues even if there were still problems on the political front. The EU must continue to develop its relations with China, was his message.

2. The Chinese Comeback Gene

As with other global economies, the gradual easing of pandemic measures also appears to be making its way to China. Too late to allow the country to reach its initial target of 5.5% for 2022 – HSBC’s chief economist for Asia, Frederic Neumann, estimated it at 3 to 3.5% – the easing sanitary measures could not only encourage consumers to buy more, but also improve sentiment in the financial sphere. Unlike Western economies, which could face a recession due to Russia’s war in Ukraine and the energy crisis, China is expected to grow by 5.2% for the coming year, Neumann said. “China will remain the game in town,” he concluded.

3. Invest in local partners

Chinese speakers at the event stressed that to successfully enter the Chinese market, international players need to find suitable local partners. “We see the importance of having a local partner,” said Desiree Wang, managing director of JP Morgan Asset Management China. “China has so many things that need to be respected.”

A word of advice from these participants: do not apply international strategies to Chinese markets if you want to attract Chinese flows.

4. The retail landscape in China is changing

“We know that younger generations are more tech-savvy,” said Alfi’s Marc-André Bechet, who identified that this would likely impact banks’ role in bond distribution. In China, confirm the experts invited to the moderated Bechet panel, more millennials and Generation Z are investing and they are more likely to do so through smartphone apps and online platforms than through a bank. “It’s no longer a bank-run business,” said David Guo, CEO of Schroders in China. The country’s tech companies have joined the companies, leading banks to counter by introducing their own digital services.

5. Secondary markets in Asia are still underdeveloped

“If you look globally, the secondary [market] accounts for around 15% of global consumption [market]said Frederic Azemard of TR Capital. In China, it’s only about 3% of the whole pie. Investing in quality assets in secondary markets is one way to generate cash, Azemard said. The challenges however are the different dynamics in Asian countries, the political consensus not to invest in China and the uncertainty regarding the easing of covid-19 related restrictions in China.

6. Retail investors are pushing for more sustainable portfolios

“We don’t understand in China among retail investors the mindset on sustainable finance issues,” Bechet pointed out. But, according to Guo, as asset management has reached its 3.0 era, many investors have started learning about sustainable investments. “For many retail investors, after ten years of evolution, sustainable investments have been associated with long-term investments, and this has made investors aware of environmental protection and social responsibilities.” The last two years in particular have seen retail investors focus on all components of ESG criteria.

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