The big issue in China is not inward investment but outward investment. Even as the queue for QFII (Qualified Foreign Institutional Investors) status lengthens (allowing access to China’s renminbi denominated A shares market, the bulk of stock market capitalisation), the talk is of when China’s own insurance and social security funds may be allowed to venture overseas freely and openly.
The upward pressure on the renminbi is one driver. Outward capital flows would provide a safety valve for a government only just starting to accept a measured revaluation.
For custodians working with the dozen or so existing QFIIs, there would be an opportunity to pick up business in the reverse direction because their names will be well known in China. Interestingly, the dominant player is Citigroup, with more than 50% of market share – more than HSBC’s share despite being in the latter’s backyard.
