There’s plenty of evidence that the Chinese government is taking an assertive long-term approach to economic growth, with the announcement of the easing of the one-child policy to balance an ageing population and the progression of the CJK/TTP with Japan and Korea to create, potentially, a trade pact that covers 20 percent of global trade.
ICBC, the world’s largest bank, contributed to the push with a high-level seminar in Auckland in late October, with senior institutional investors, brokers and bankers in attendance and top economists and finance experts addressing them.
Industry-leading commentary came from speakers including ICBC’s deputy head economist Dr Zhigang Fan, who spoke about the expansion of the Chinese government and corporate bond market and the methods by which New Zealand-based investors can get a direct stake in the still-upwardly mobile Chinese economy. The inter-bank bond market represents the lion’s share of issuance, at 10.4 trillion RMB/yuan of a total of 11 trillion issued in 2014. Speakers also explained how to work with intermediaries; how to tap into the bond market electronically; the rules and regulations for this type of investment; and how foreign institution participation is increasing.
The event was a milestone for China-New Zealand economic relations following ICBC’s entry into the market in 2013, and is evidence of China’s increasing propensity to look outward for investment as more Chinese settle in New Zealand and New Zealand businesses expand into China.
Everything is Relative? Key Issues to Consider in Relation to the Chinese Bond Market:
- While China’s economy has slowed to single-digit annual growth, the current 6.9% rate still represents 700 billion RMB, which is equivalent to 2010’s 10.4% growth rate – a staggering figure in global terms. Company owners know how tough it is to sustain high growth even without challenges to the world economy. The Chinese economy will create nine million new jobs this year, close to the government’s target of 10 million;
- The economy is transforming beyond industrialisation to focus more on the services sector;
- The China bond market has seen tremendous growth in recent years, but the challenge has been to inform New Zealand investor markets about which bonds are available, how to access the investments as a foreign investor, and how to avoid pitfalls – managing the risk perception is critical;
- Some investors have been burned by not going through the right channels. It’s advisable to seek out firms with a firm base in New Zealand who can understand both markets and act as counsellor and conduit.
