Understanding China: an economic and investment perspective, part II

August 2021

China’s position in the world economy and its aspirations have important implications for investors. In part II of our series on China, we focus on China’s financial markets, the channels accessible to institutional investors, and key risks.

China has the largest banking system, along with the second- and third-largest stock and bond markets, respectively, in the world. However, foreign participation and foreign ownership remains limited. Until recently, most of China’s financial assets were not accessible to international investors. Even when assets were available, international investors were required to pass through extensive vetting by China’s securities regulators. This has created a considerable imbalance between China’s large and growing GDP footprint in the global economy and its position in international investor portfolios, which remains relatively small.