Standard Chartered ramps up China business on financial opening-up

The continued two-way opening-up of the Chinese capital market has further fueled Standard Chartered's confidence in China, which will be translated into the bank's deepening participation in renminbi internationalization and expansion of its offshore finance, wealth management and outbound corporate businesses, said the bank's top executives.

Bill Winters, group chief executive of Standard Chartered, cited the recently announced upgrade measures for Bond Connect as the latest step forward regarding the two-way opening-up. This signals a more mature integration of onshore and offshore financial assets, ranging from government bonds to credit products and now gold, he said.

The People's Bank of China will increase the allocation of national foreign exchange reserve assets in Hong Kong while expanding the Bond Connect program as part of a broader package of measures to strengthen the city's role as an international financial center, PBOC Governor Pan Gongsheng said at a summit held in Hong Kong in early July.

The PBOC will also expand the scale and scope of the Bond Connect southbound channel, which facilitates mainland investors to invest in bonds in Hong Kong, by raising its annual net investment quota to 800 billion yuan ($118 billion) from 500 billion yuan, broadening the range of products available under the scheme, and extending its reach to Macao's bond market, he added.

Hong Kong's importance in the RMB's internationalization has been reaffirmed by the recent move. Apart from strengthening the ties regarding physical and financial gold channels between Shanghai and Hong Kong, the new measures will lead to stronger cooperation with London, which is a major global hub for gold trading, clearing, settlement and storage, Winters said.

Describing the new arrangement as "one stone with multiple birds", Ben Hung, president, international at Standard Chartered, said this arrangement facilitates the diversification of reserve assets, which is of rising importance given the world's ongoing fragmentation. The RMB and gold, both in the financial and physical forms, are crucial to such diversification, given that China is one of the economies with rich reserves, he said.

During the Lujiazui Forum held in June, the central financial regulators announced plans to further expand the qualified domestic institutional investor quota — the outbound investment program. This was only three months since the QDII quota was last expanded. According to Winters, this is another clear message showing China's steady advancement of liberalization of its capital market, which Standard Chartered will be active in being part of.

On the other hand, Standard Chartered has noticed overseas investors' rising interest in China assets and the qualified foreign institutional investors program, according to Standard Chartered's China CEO Lu Jing.

To this end, the bank set up its chief investment office in Shanghai in the first half of this year to help overseas investors understand China assets, Chinese equities and bonds, she said.

Given that the RMB's internationalization has entered the 2.0 phase, "Shanghai will play a bigger role regarding commodities, RMB's liquidity, yuan-denominated assets and risk management tools by leveraging its onshore advantages. Hong Kong will seek closer cooperation with Shanghai by making full use of its ample liquidity as a mature offshore center", said Lu.

While much has been said about globalization retreating, Winters holds a different understanding, saying that "globalization is going forward in different ways".

On a broader perspective, trade volumes are increasing instead of decreasing, and so are cross-border payments, he said.

From the bank's perspective, they have seen international investors' unchanged interest in China. Standard Chartered's non-Chinese clients' interest in Chinese business is still very high, including exports and partnering with Chinese tech companies. International companies' purchase of Chinese components, design and intellectual properties has been on the rise, he said.

On the other hand, Chinese companies are accelerating their international expansion, diversifying manufacturing into ASEAN, South Asia, the Middle East and Africa, while continuing to secure resources and new market opportunities, said Winters.