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China is a tough nut to crack for foreign banks as tech giants like Alibaba and Tencent established their financial services, says Catherine Yeung of Fidelity International in an interview with finews.asia.

Cryptocurrencies are all the craze in Asia at the moment. Why are local investors so interested in buying bitcoin et al?

The asset management industry in Asia is still in its infancy and investors are prone to taking risks. If you for instance look at what you can buy in China as an investor – a lot of it is property. But that’s not speculative. People buy property to live in.

If you look at the stock market, a huge percentage of liquidity in the past six months has gone into a very narrow sector of the market in Hong Kong, into Tencent, Sunac, Evergrande and Geely.

China deems cryptocurrencies as a grey area of the market and as very hard to regulate

And the fundamental stories behind those companies are very different from the amount of liquidity going into them through the Stock Connect system launched by the government of China.

How do you mean?

Beijing connected the indexes in Shanghai and Shenzen with Hong Kong through this system. Money from mainland China going south to Hong Kong is monitored and regulated by a daily quota.

And what does this have to do with bitcoin?

China deems cryptocurrencies as a grey area of the market and as very hard to regulate. That’s why they are looking to control the trading of cryptocurrencies. If you look at the problems outstanding this year, we will likely see more financial reforms being implemented with a lot of scrutiny going into cryptocurrencies.

«Tenpay and Alipay have created a duopoly»

They also want to prevent a big bubble. And that’s why they’ve been talking about banning cryptocurrencies for months.

What are the other areas of the market likely to be regulated more stringently?

Recently, the securities commission received 12 IPOs submissions. The commission accepted two, rejected nine and postponed one. So the regulator is creating a tighter framework, which is good if you are going to open up your capital market.