In today's economic globalization, the inflow and outflow of foreign capital is no longer a new topic. In the past few decades, with the opening of the Chinese market and economic growth, various ** investments in China have also been increasing. For example, Blackstone, KKR, Standard Chartered**, etc. have successively bet in the Chinese market. However, at the same time, the "old money" that has been in the Chinese market for a long time is gradually withdrawing.
On December 11, Standard Chartered announced that the company has obtained the business license issued by the China Securities Regulatory Commission, which means that Standard Chartered will become the third wholly foreign-owned brokerage after JPMorgan Chase ** and Goldman Sachs Gao Hua**, in addition, Mizuho** and BNP Paribas ** are also applying to become wholly foreign-owned brokers.
At present, under the influence of China's continuous relaxation of foreign shareholding restrictions, some "old money" who entered China's capital market early have increased their shareholding ratio according to their own investment strategies.
From equity participation to holding to full ownership, these WFOEs are becoming a group of "new foreign investors" in China's capital market.
However, with the changes in the economic cycle, there are also some "old money" who have chosen to shrink the front, and at the same time, the Middle East sovereign**, which is looking for investment targets around the world, is becoming a "new upstart" in China's capital market.
"New foreign investment" turned to the left
Recently, Standard Chartered announced that the company has obtained the "Business License" issued by the China Supervision and Administration Commission, and plans to officially open business in the first half of 2024.
This means that Standard Chartered will become the third wholly foreign-owned brokerage after JPMorgan Chase and Goldman Sachs.
However, unlike JPMorgan Chase and Goldman Sachs to achieve full ownership by increasing their shareholdings, Standard Chartered** is the first newly established wholly foreign-owned brokerage and the first British-backed brokerage in China.
In fact,Since the China Securities Regulatory Commission announced the abolition of the restriction on foreign ownership in ** companies in 2020, foreign capital has begun to "turn to the left", the original joint venture securities companies have continued to increase the proportion of foreign shareholdings, and wholly foreign-owned securities companies have also applied for business in China.
According to statistics, as of now, there are 10 foreign-controlled brokerages, of which 3 are wholly foreign-owned brokers, while at the beginning of 2020, there were only 3 foreign-controlled brokerages, and wholly foreign-owned brokerages did not appear.
In addition to Standard Chartered, which has obtained a license, on November 22, the official website of the China Securities Regulatory Commission showed that the application materials for the "** Company Establishment Approval" of Mizuho** Co., Ltd. have been accepted. In addition, there are two foreign securities firms waiting for the approval of the establishment, namely BNP Paribas ** and Qingdao Yicai**, of which Mizuho** and BNP Paribas ** are wholly foreign-owned brokers, while Qingdao Yicai** is a foreign-controlled brokerage.
In the context of the continuous relaxation of the proportion of foreign ownership in the financial sector, foreign capital not only "seeks" to increase the shareholding ratio of ** companies, but also gradually expands the number of other financial companies controlled by foreign capital, wholly-owned insurance, public and private equity**.
In terms of foreign-funded insurance, up to now, there are three wholly foreign-owned life insurance companies in China. In addition to AIA Life, which was wholly foreign-owned at the time of its establishment, in November 2021, Allianz (China) Insurance Holdings acquired 100% equity of Sino-German Allianz Life, becoming the second wholly foreign-owned life insurance company and the first life insurance company in China to be converted from a joint venture to a wholly foreign-owned life insurance company. In December of the same year, HSBC Life (Asia) acquired 100% equity interest in HSBC Life, becoming the third wholly foreign-owned life insurer to be successfully approved.
In terms of foreign capital public offerings,Since 2021, BlackRock** became the first wholly foreign-owned public offering** management company approved for business development, and the "new recruiting" of wholly foreign-owned public offerings has continued.
Up to now, the total number of wholly foreign-owned public offerings in China has increased to 9. Among them, 6 companies, including BlackRock**, Fidelity**, Neuberger Berman**, Schroders**, AllianceBernstein** and Allianz**, which was approved this year**, are newly established public offerings for foreign capital**; Manulife ** Management, JPMorgan Asset Management and Morgan Stanley ** are Sino-foreign joint venture public offerings converted to wholly foreign-owned public offerings through equity transfers**.
Compared with public offerings, in the field of private placement, WFOE was established earlier, since the establishment of Fuda Litai in January 2017, WFOE has been in China for more than 5 years. In the past five years, the number of wholly foreign-owned private placements has grown steadily. According to the data, up to now, a total of 34 institutions have registered as wholly foreign-owned private equity managers in the ** industry association.
However, from the perspective of assets under management, there is an obvious "gap" between the wholly foreign-owned private equity investment, and the vast majority of the 34 institutions have a small private placement scale, with 24 of them ranging from 000 million to 500 million yuan, and only 6 of the wholly foreign-owned private placements of more than 2 billion yuan, of which only Bridgewater has a scale of 10 billion.
At the same time, after the liberalization of the proportion of foreign shareholding in the public offering,For example, BlackRock and Fidelity International voluntarily cancelled the registration of private equity **investment managers) of their wholly foreign-owned enterprises BlackRock Investment and Fidelity Litai Investment in March 2021 and March 2022 respectively.
It is worth mentioning that as China's financial market continues to open up,In particular, since the rollout of QDLP in 2020, many foreign private equity companies have raised funds in China through QDLP and invested in strategies that overseas parent companies are better at.
For domestic investors, QDLP expands overseas investment channels and allows them to invest in more mature overseas products. For foreign institutions that want to enter China, the QDLP pilot is also a suitable entry point, which is conducive to their familiarity with the market and the layout of their business based in the Chinese market.
For example, in August this year, Shanghai Blackstone**, a wholly-owned subsidiary of trillion-dollar PE giant Blackstone, completed its registration, and its business type was shown as a QDLP pilot institution.
Before Blackstone, the global PE giant KKR got the "license" of QDLP last year. In May last year, KKR's Kaide Private Equity Management (Hainan) completed its registration and filing with AMAC, and its business type is a QDLP pilot institution.
In addition, as the first wholly foreign-owned private placement to complete the registration in 2023, One Peach Private Equity ** Management (Shanghai)** is also the first institution to win the QDLP pilot this year.
The opposite of the "old money" and the "new rich".
While some foreign capital flocked to the front, some "old money" also chose to shrink the front.
On September 7, global assets under management reached 8The $9 trillion BlackRock announced the closure of its China Flexi* subsidiary, which reduced its activities in China's capital markets.
Soon after, the scale of funds under management was 1Norway's $4 trillion sovereign** has also announced the closure of its Shanghai office.
Another two months passed, and on November 10, the scale of funds under management reached 7The $8 trillion Vanguard Group has also confirmed the closure of its office in Shanghai, China, and the name of the company has changed from the original Pioneer to Ant (Shanghai) Investment Consulting***
It is understood that the Chinese branch of Silicon Valley**KPCB, which is as famous as Sequoia, has not made any investment since 2021. Accel, which has invested in Facebook and Chinese drone company DJI, has stopped making new investments in China since 2019.
StillThere is no shortage of "suitors" in the huge Chinese market, among which the "upstarts" from the Middle East are stepping up their layout.
Saudi Arabia's public investment**, for example, invested US$12.2 billion in China from 2017 to 2021, accounting for 20% of its total overseas equity investment. In addition, according to the research of Industrial **Since 2020, the Abu Dhabi Investment Authority has continued to increase its position in Chinese mainland assets, with Chinese mainland ranking rising from fifth in late 2019 to third in the first quarter of 2023.
According to the announcement of listed companies, since the beginning of this year, a number of A-share listed companies such as Xiling Power, BAIC Blue Valley, and Oriental Shenghong have announced that they will join forces with Middle East Capital to cooperate in the fields of new energy vehicles and parts and petrochemicals by signing relevant agreements and jointly investing in the establishment of joint ventures.
In the primary market, capital inflows from the Middle East are also accelerating. Saudi oil giant Saudi Aramco bought a 10% stake in Rongsheng Petrochemical for 24.6 billion yuan, and NIO also received a strategic investment of about $1.1 billion from Abu Dhabi investment firm CYVN.
As another sovereign wealth from the UAE**, Mubadala has invested in Boss Zhipin, Kuaishou, Ziru and so on as an LP.
At the same time, this year, Middle East capital has frequently appeared in A-share listed companies. On December 10, Kingdee International announced that it had reached a definitive agreement with the Qatar Investment Authority, under which the Qatar Investment Authority would invest approximately US$200 million as consideration to subscribe for the ordinary shares issued by Kingdee International under a general mandate.
According to the data, as of the end of the third quarter of this year, the sovereign wealth of two Middle Eastern countries, the Abu Dhabi Investment Authority and the Kuwait Investment Authority**, appeared in the list of the top ten circulating shareholders of 51 A-share listed companiesAmong them, the Abu Dhabi Investment Authority entered the top 10 outstanding shareholders, up from 73 in the middle of this year1.3 billion yuan increased to 950.9 billion yuan.
At a time when US dollar investment** is strategically shrinking, the "surge" of Middle Eastern capital may indicate that the Middle Eastern countries in a positive transformation hope to diversify their economies by investing in Chinese assets or investing in Chinese companies, and get rid of their current heavy dependence on oil and dollar capital.
Changes behind foreign investment
With the influx of Middle Eastern capital into China, a term is increasingly emerging – sovereign wealth**.
Unlike the previous private wealth** mainly from Wall Street, the "upstarts" from the Middle East are all sovereign wealth**, benefiting from the soaring international oil prices and international **expansion in recent years, the scale of Middle Eastern sovereign wealth** has increased sharply, and as of 2022, the total AUM of Middle East sovereign wealth** is as high as 3$64 trillion, or one-third of the world's total sovereign wealth**.
As sovereign wealth**, in addition to investment returns, the country's overall development strategy is also a key factor to consider when making investment decisions.
At present, Middle Eastern countries are in a period of transition from oil economy to diversified development, such as Saudi Arabia's "Vision 2030 Plan" and the United Arab Emirates' "2025 Digital ** Strategy", all of which are advocating the vigorous development of non-oil industriesTherefore, behind the crazy sweeping of the "upstarts" in the Middle East, there is also a hidden demand for the upgrading of the Middle East countries' own industries.
In this regard, CITIC pointed out that in terms of investment preferences in China, the sovereign wealth of the Middle East is more inclined to allocate manufacturing, public utilities, raw materials and essential consumption related to its own industrial structure, and with the advancement of the industrial upgrading strategy of major economies in the Middle East, it is expected to increase the layout of China's advantageous industries such as new energy and advanced manufacturing, which echoes its own development strategy.
Judging from the layout of A-shares, the Kuwait** Investment Authority and the Abu Dhabi Investment Authority, which are known as the "two giants of the Middle East", seem to have a "favor" for the pharmaceutical and biological industries.
The Abu Dhabi Investment Authority favors the power equipment and pharmaceutical and biological industries the most, and the top 10 circulating shareholders of 5 listed companies in each of the two industries are the presence of the Middle East**. This is followed by the non-ferrous metals and automotive industries, each with three listed companies. The rest of the listed companies are distributed in basic chemicals, agriculture, forestry, fishery and animal husbandry, machinery and equipment, banking, building materials, electronics and other industries.
The Kuwait Investment Authority's preference is more pronounced than that of the Abu Dhabi Investment Authority, which is among the top 10 outstanding shareholders of seven of the 27 listed companies in the pharmaceutical and biotechnology category.
In addition,The most important thing for the "upstarts" from the Middle East is whether they have room for cooperation with investment enterprises in the future, so that they can introduce their industries to the Middle East and land, so as to promote the upgrading of their own industrial structure.
For example, the new energy vehicle industry in China is in full swing, and in June this year, three Middle Eastern capitals, Saudi Arabia, Jordan and the United Arab Emirates, invested in three new energy vehicle companies: Human Horizons, Great Wall Huaguan and Weilai. In the same month, Great Wall Huaguan, the parent company of Qiantu Auto, and Human Horizons, the parent company of Gaohe Automobile, reached billions of dollars of cooperation agreements with Jordan and Saudi Arabia respectively.
It is foreseeable that Middle Eastern capital, which is looking for investment targets around the world, may play a more important role in China's economic map in the future with the further development of China's economy.