With a recent initiative to increase foreign investment in
Chinese bond and stock markets in full swing, Japanese asset management
executives are hoping that recent political stand offs between the two
countries won’t hamper Japan’s bid to be included in the scheme.
The Renminbi Qualified Foreign Institutional Investor
program (RQFII) allows foreign raised yuan to be used for direct investment
inside China by asset managers from abroad, and is being utilized by executives
in over ten nations already, including Britain and Australia.
Japan has a growing amount of household savings burning a
hole in the nation’s economy, and asset managers say inclusion into RQFII will
encourage them to efficiently funnel more of those substantial funds into their
neighbour’s markets.
Asset management firms such as CITC Tokyo International have
announced publicly that they are desperate to invest In China’s high yield
bonds, which offer significantly higher returns than traditional investment
opportunities.
Other Asian nations have done well from the scheme, with
South Korea’s RQFII quota being raised by 50% recently. RQFII was thought to be
one of the primary talking points in a Sunday summit meeting between Chinese
Premier Li
Keqiang and Japanese
Prime Minister Shinzo
Abe, although it is not clear if any firm agreement was made, and no official
statement has been released.
Due to elevated political bickering between the two nations involving
wartime history, and the dispute over South China Sea territory, relations have
been frosty at best in recent years. As a result, the RQFII scheme introduced
in 2011 has so far been out of reach of the Japanese, much to the finance
sector’s disappointment.
After an official request by Taro Aso, the Japanese finance
minister, for the Chinese to allow Japan into the program last month, sentiment
was positive that China could reverse their stance as the nation’s central bank
and governmental finance authorities have been trying to show the yuan is a
global currency. China wants the IMF to grant the yuan a reserve-currency
status and a decision is expected soon.
A decision by the IMF for the yuan would greatly enhance
China’s ability to chase down the only nation above them in the economic
rankings, the United States.
The aim of RQFII is to limit market volatility while at the
same time broadening opportunities for foreign investment into its markets.
Qiumei Yang, executive at lobby group ICI Global Asia
Pacific said “This would be enormous for Japanese investment banking. We would
be able to customize products for Chinese investment”.
