Offshore investing for Chinese slowing

In an article in today's FT the ability of Chinese nationals of invest offshore is discussed. The obvious finding is that Chinese nationals still lack expertise to invest in international markets. Home bias is a well known and in China's case it is likely to be exacerbated by limited information.

Offshore investing out of favour in China [FT]

According to a survey by a Chinese securities journal last week, more than half of Chinese individual and institutional investors think domestic investors do not have the knowledge or skills necessary to invest wisely in global markets.

That pessimistic view is reflected in the performance of the first Chinese mutual funds based on offshore investments, all of which are down more than 20 per cent since they debuted late last year.

The avalanche of retail interest in offshore investments last year has evaporated as the markets drop and China’s so-called qualified domestic institutional investor (QDII) scheme once again falls out of favour.

Last year, following a groundbreaking reform, Chinese fund managers launched four funds dedicated to investing abroad, all of which sold out within hours of opening to subscriptions and received many times the offshore investment quotas of $5bn (£2.5bn, €3.4bn) each granted to them by the Chinese government.

The explanation is clear:

China still operates a largely closed capital account, strictly controlling the flow of funds in and out of the country’s capital markets, but the former British colony of Hong Kong has long been integrated into the global economy and is regarded almost as a separate country when it comes to economic matters.

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