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4. Foreign Entrance

Amid unprecedented disruption, global financial institutions like Goldman Sachs, Blackrock, UBS, Credit Suisse, HSBC and more are entering the mainland market wholesale. They are all attempting to obtain majority or full ownership in entities focused on a diversified range of financial services including securities, wealth management, asset management, insurance and more.

The fact that these global financial institutions are convinced about the business prospects in the mainland is self-evident. And while Chinese firms have traditionally been successful at fundraising abroad, the track record for luring investors into the mainland remains limited. According to a Matthews Asia and Greenwich Associates survey of more than 100 institutional investors, two-thirds of respondents cited a «basic lack of trust in the government» as the top reason for not significantly increasing allocations to the market.

But there are serious efforts at reforms by Beijing that could improve investor confidence. Regulators recently cracked down on credit rating agencies for lax processes and lacking risk controls, most recently reportedly issuing a three-month ban on Moody’s China joint venture. Just yesterday, global banks also lauded efforts to improve pricing efficiency by enabling foreign financiers to securities lending and stock shorting.

5. Asset Risk

Greater self-reliance from banks, removal of fintech participation and ongoing reforms to bolster market efficiency all point to potential repricing in various areas.

But this is occurring while China posted another record year of defaults with the corporate bond market expected to see continued stress in 2021. Authorities in Beijing are already readying for more non-perfuming assets to trickle down with the introduction of the first new bad debt manager in two decades.

While fresh investors could see this as an opportunity to enter at a favorable levels, others may wait out to led the market first absorb impact from the ongoing reforms and ground-shaking moves.