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Citi Transaction Services | Citi OpenInvestor
remain far too reliant on a very small
set of holdings for their portfolios.
Limited returns exacerbate the
nation’s pension problems. A much
more fexible and resilient system is
absolutely necessary for the country
to confront a decade of potentially
lower GDP growth rates, and with
this in mind frms interested in the
China market need to keep several
important elements in mind:
• International asset managers must
focus their attention on enhancing
their brand within China. Having
a one-size-fts-all approach to
any client is impossible, and has
unfortunately led to a signifcant
amount of wasted effort.
• Finding a way to overcome the
distribution bottleneck is critical
to realizing growth. This is true for
domestic managers, and soon will
also be the case for foreign frms
operating investment platforms
onshore.
• Once fund distribution by foreign
banks is allowed in China, providing
post-sales support and advice will
be the best way to attract clientele.
• Growth of the market, along with
further expected liberalization, will
mean a host of opportunities for
frms that already have operations
in place and can hit the ground
running.
• Additionally, demand for offshore
allocation from Chinese investors
has not been met by solutions
provided locally. This means a
signifcant amount of untapped
capital awaits frms that are able to
offer attractive products.
• Seeking China-sourced business
has traditionally been possible
without a local presence. Over
the next several years, such an
approach will become much less
effective as the pool of possible
institutional targets widens.
• All of these efforts are dependent
on having direct access to a
dedicated onshore platform.
China remains a highly complex
market, and while continued
liberalization offers hope, it does
not necessarily bring simplicity.
Though an on-the-ground presence
is essential, it has become merely
table-stakes. Many of those with an
onshore presence have struggled to
raise assets.
At the same time, China’s future
is decidedly bright. For foreign
managers negotiating the
hypercompetitive North American
market, or stuck in the doldrums
of Europe, China seems to offer
tremendous hope, managed assets
and economic growth converge.
While China is not a panacea, there
is much to be gained by a thoughtful
approach to the market. True success
requires innovative solutions, a frm
understanding of the distribution
dynamics and above all, a long-term
commitment.
“When considering what
approach to take to China’s
fnancial markets, it’s
important to remember
that regulatory changes
rarely beneft the newly
arrived. While frst movers
typically have an extremely
strong advantage, regulatory
changes — one of the prime
levers of growth — rarely
occur in isolation or without
warning.”