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Our reporter Guo Jingting reports from Beijing

Against the backdrop of the evolving global economic landscape, the Chinese market is attracting the attention of foreign capital with its unique charm.

With the further opening of China's capital market, the expansion of the qualified foreign investor (hereinafter referred to as "QFII") qualification list has become the focus of international investors. Wind data shows that by the end of June, the number of QFII institutions has reached 839. The growth of this number not only reflects the degree of openness of the Chinese market, but also reflects the confidence and expectations of foreign capital in China's capital market.

The interviewees said that the Chinese market provides abundant investment opportunities for foreign capital, especially in the fields of technological innovation, green development, and high-end manufacturing. However, foreign capital also faces challenges in the process of tapping into the Chinese market, such as market fluctuations and policy changes. Therefore, foreign institutions need to have a deep understanding of the characteristics and policy orientation of the Chinese market, seize investment opportunities, and also do a good job of risk management.

"QFII pays more attention to medium- and long-term performance. Foreign capital believes that the current price of Chinese assets is suitable for investment. They first apply for qualification quotas and then choose to flow in when the opportunity arises. This has no direct relationship with the short-term trend of the capital market. It is a layout for long-term investment by foreign capital." Yang Delun, chief economist and fund manager of Qianhai Kaiyuan, told a reporter from China Business News.

QFII expands to 839 companies

According to data from the China Securities Regulatory Commission, 36 institutions were approved for QFII qualifications in the first half of this year, including Canada's Divi Trading, Singapore's Aravali Asset Management, Oman Investment Authority, Qatar National Bank Public Joint Stock Company, and Netherlands' Mevoli Derivatives Investment Company. As a representative of overseas long-term funds, the layout and holding changes of QFII have also attracted investors' attention.

The reporter checked Wind data statistics and found that as of August 15, a total of 394 Shanghai-Shenzhen listed companies had disclosed their 2024 semi-annual reports. Among the nearly 400 semi-annual reports, about 50 A-share listed companies disclosed that QFIIs appeared among the top ten shareholders or the top ten circulating shareholders at the end of the second quarter.

Wind data shows that at the end of the second quarter, there were 15 stocks with a market value of more than 100 million yuan held by QFII. Among them, the stocks with the highest market value held by QFII wereBank of Nanjing（601009.SH），Wanhua Chemical（600309.SH）、Focus Media（002027.SZ）、Haida Group（002311.SZ）、China Testing Technology Co., Ltd.（300012.SZ）、Satellite Chemistry（002648.SZ）、New Energy(601918.SH) The market value of its holdings in this period reached 1.756 billion yuan, 1.076 billion yuan, 798 million yuan, 758 million yuan, 602 million yuan and 610 million yuan respectively.Hongfa sharesThe market value of the shareholdings of the following companies: (600885.SH), Angel Yeast (600298.SH), Kuncai Technology (603826.SH), Huaming Equipment (002270.SZ), Tuobang Holdings (002139.SZ), Huafeng Chemical (002064.SZ), Xianhe Holdings (603733.SH) and Yongjin Holdings (603995.SH) all exceed 100 million yuan.

Judging from the latest holdings, more than 20 listed companies have received new QFII holdings in the first half of 2024.Yingli shares(300956.SZ) QFII's newly added holdings had a market value of 72.7814 million yuan, and the number of newly added QFII shareholders was the largest, reaching five, namely Goldman Sachs Group, Morgan Stanley International plc, JPMorgan Chase Securities plc, Barclays Bank plc, and UBS Group AG.

The reporter checked the 2024 semi-annual report of Yingli Shares and learned that the above five QFIIs ranked third, fifth, sixth, seventh and tenth among the top ten circulating shareholders respectively.

It is reported that Yingli shares focuses on the field of structural parts modules and precision molds for consumer electronic products. Its semi-annual report released on August 8 showed that its operating income in the first half of the year was 752 million yuan, a year-on-year increase of 19.27%; the net profit attributable to shareholders of the listed company was 5.101 million yuan, turning losses into profits year-on-year.

The reporter noted that Nanjing Bank had the highest market value of QFII holdings, with a market value of 17.633 billion yuan at the end of the period. The semi-annual report showed that during the reporting period, BNP Paribas (QFII) increased its holdings by a total of about 146 million shares through the centralized bidding transaction method of the Shanghai Stock Exchange trading system with its own funds, accounting for 1.41% of the company's total share capital at the end of the reporting period; BNP Paribas and BNP Paribas (QFII) held a total of about 1.828 billion shares, accounting for 17.68% of the company's total share capital at the end of the reporting period.

Jinpu TitaniumThe 2024 semi-annual report disclosed by (000545.SZ) shows that JP Morgan Securities PLC's own funds also significantly increased its holdings in Jinpu Titanium in the second quarter. Jinpu Titanium achieved operating income of approximately 1.13 billion yuan in the first half of 2024, a year-on-year increase of 0.61%, and the net profit attributable to shareholders of the listed company was a loss of approximately 20 million yuan, a reduction from the same period last year.

Promoting diversity and internationalization

Recently, the Chinese government has taken a series of new measures to open up the capital market, including but not limited to optimizing the qualified foreign investor system and improving the convenience of foreign capital in equity investment and venture capital in China. The implementation of these measures is aimed at attracting more foreign capital to enter the Chinese market and promoting the diversification and internationalization of the capital market.

Specifically, on August 2, Zhu Bing, Director of the Foreign Investment Management Department of the Ministry of Commerce, stated at a press conference held by the State Council Information Office that the "Administrative Measures for Strategic Investments by Foreign Investors in Listed Companies" will be revised and issued to guide more high-quality foreign capital to enter the capital market for long-term investment.

On July 26, the People's Bank of China and the State Administration of Foreign Exchange jointly issued an announcement to revise the "Regulations on the Management of Funds for Domestic Securities and Futures Investment by Foreign Institutional Investors" to further optimize the cross-border fund management of qualified foreign institutional investors and renminbi qualified foreign institutional investors (QFII/RQFII).

The Third Plenary Session of the 20th CPC Central Committee also mentioned the need to comprehensively deepen the reform and opening up of the capital market.

So, what should we focus on when deepening the reform and opening up of the capital market?

Chen Li, chief economist of Sichuan Cai Securities, analyzed in an interview with reporters that the opening of the capital market mainly lies in expanding market access, optimizing the qualified foreign investor system (QFII/RQFII), expanding the cross-border interconnection mechanism of the capital market, relaxing the opening of the securities, funds and futures industries, deepening the opening of financial products, cross-border regulatory cooperation and supporting foreign institutions to operate in China. The opening of China's capital market is two-way, aiming to build a more open, competitive and orderly market environment, attract more foreign investment participation, and enhance the internationalization level of the market.

Wang Tingting, professor of the School of Finance and director of the Securities and Futures Research Institute of the Central University of Finance and Economics, said that according to the positioning of the new "Nine National Policies", in the future, in order to deepen the reform and opening up of the capital market, in addition to the traditional introduction of foreign capital and institutions, we must also focus on high-level institutional opening up. Opening up will be carried out in four aspects: market access, investment scope and quota, fund management and exchange convenience, and regulatory system in line with international standards.

Specifically, the entry conditions for foreign capital markets will be further relaxed, allowing more foreign institutions to enter the Chinese market and participate in the operation of securities, funds and other businesses; the investment scope and quota of qualified foreign investors (QFII) and renminbi qualified foreign investors (RQFII) may be expanded to enable them to invest more flexibly in the Chinese market; cross-border funds management regulations will be optimized to provide foreign capital with more convenient fund exchange and management services and reduce its operating costs; the regulatory system will be improved to make it more in line with international practices, improve the transparency and efficiency of supervision, and create a fairer and more transparent competitive environment for foreign capital.

Local competition among foreign institutions

According to the latest disclosure by the China Securities Regulatory Commission on August 9, "Notice on the Acceptance and Review of Applications for Administrative Licenses of Securities and Fund Operating Institutions (Golden Kylin Analysts)", the establishment applications of several foreign-funded securities firms, including Citi Securities, Mizuho Securities, Qingdao Yicai Securities, etc., are currently in the approval stage.

Reporters have noticed that this year, the capital market is complex and volatile, but foreign investment in China remains enthusiastic. What is the reason behind this? What impact will it have?

In Chen Li's view, after foreign securities firms enter my country, they can add appropriate localized investment strategies to adapt to the environment based on their own cross-border business advantages.

Chen Li said that the reasons why foreign capital has shown great enthusiasm for China's capital market mainly include the following: First, my country's market size is huge, with a large consumer group, which provides huge market opportunities for foreign capital; second, China's economy has been improving in the long run, with strong endogenous growth momentum and innovation capabilities, especially in the fields of scientific and technological innovation, green energy, and high-end manufacturing. It has shown growth potential; third, the Chinese government has introduced a number of financial opening policies in recent years, such as relaxing restrictions on shareholding of foreign financial institutions, expanding the quota of Shanghai-Hong Kong Stock Connect, and promoting the internationalization of the bond market, which has facilitated the entry of foreign capital; fourth, China has the most complete and largest industrial system in the world, providing foreign-funded enterprises with efficient and complete production and supply chain advantages; fifth, China's capital market continues to deepen reforms, such as the launch of the Science and Technology Innovation Board and the implementation of the registration system, which has increased the attractiveness and vitality of the market.

"Foreign institutions need to diversify their investment portfolios to reduce risks. As an important emerging market, the Chinese market is attractive to foreign institutions. At the same time, we have a relative valuation advantage. Globally, the relative valuation of the Chinese market may be lower, providing foreign capital with better buying opportunities," Wang Tingting analyzed.

"With the recovery of the global economy and the warming of the market, foreign capital needs to reconfigure assets to reduce risks and seek higher returns. As one of the important representatives of emerging markets, the Chinese market has naturally become the focus of foreign capital. In addition, the RMB exchange rate is relatively stable and has certain appreciation potential, which has also increased foreign capital's interest in entering the Chinese market. Foreign capital can diversify exchange rate risks and obtain certain exchange rate benefits by investing in the Chinese market." Tian Lihui, Dean of the Institute of Financial Development at Nankai University, pointed out.

How can foreign capital participate in local competition after entering the market? How should small and medium-sized securities firms in the mainland respond?

"After entering the Chinese market, foreign securities firms will face the challenge of localized competition. In order to participate in the competition, they must have an in-depth understanding of the Chinese market, study the characteristics of the Chinese market, investor behavior, regulatory policies, etc., in order to better adapt to the market environment." Wang Tingting said when talking about the localization development strategy of foreign capital.

Wang Tingting further analyzed that in terms of talent development, foreign securities firms may actively recruit and cultivate local talents familiar with the Chinese market, especially teams with rich experience and resources, to enhance their competitiveness in the Chinese market. In terms of business development, they may emphasize both innovation and cooperation, on the one hand exploring business innovation models that meet the needs of the Chinese market, and on the other hand seeking cooperation opportunities with local securities firms, investment banks and other institutions to jointly develop the market.

In Chen Li's view, small and medium-sized securities firms in the mainland can respond through differentiated operations and professional services. Small and medium-sized securities firms should further clarify their market positioning, give full play to their own characteristics, and provide differentiated services, such as focusing on a certain market segment or business field to form a distinctive competitive advantage. They should also strengthen their professional service capabilities, improve service quality and efficiency, meet customers' personalized needs, and increase customer stickiness through professional services.