3 Reasons to Choose China and the QFI Scheme

As the world's second-largest economy, China's market has become increasingly influential and attractive to investors worldwide.

In this article, we delve into three compelling reasons why investing in China and leveraging the QFI Scheme is crucial. This is especially so for those seeking to tap into this expanding market and seize opportunities offered by China's economic dynamism.

China's market presents a wealth of possibilities that investors should not overlook. This is due to its sheer size and consumption power, as well as its technological advancements and integration with global markets.

 

Is China an Emerging Market?

China is experiencing an economic recovery with the easing of Covid restrictions. This is leading to a return to normalcy for consumers and businesses.

China Briefing reported that China's economy has been experiencing a consistent but uneven recovery since the lifting of China COVID-19 restrictions. In the first quarter of 2023, the country's GDP grew by 4.5 percent. This figure represents a robust growth rate that surpasses the 3 percent GDP growth recorded for the entire year of 2022.

However, it falls short of the government's target of achieving 5% GDP growth for 2023.

According to Reuters, banks predicts that China's GDP will grow between 5.1% and 5.7% by the end of the year. This is despite a slow start in the first half of the year.

China has introduced a new series of stimulus measures aimed at revitalizing its economy in June this year.

 

Why Trade in China’s Market?

Being the world’s second-largest economy, China is an essential manufacturing and consumption for the global market. China Briefing reported that the main 3 reasons to invest in China are:

 

1. China’s Market Size and Growth Potential

China's economy, despite a slowdown in recent years, remains significantly larger than most others, making it a country of immense importance. It is the world's second-largest economy with a GDP of $18 trillion in 2021, surpassing the entire European Union.

China has a population of 1.4 billion and a GDP per capita that is six times lower than the United States. This indicates that there is substantial room for further growth.

Projections suggest a sustained growth rate of 5.7 percent until 2025, transitioning towards becoming a high-income country and potentially surpassing the United States as the world's largest economy by 2030 (CEBR).

 

2. China’s Human Resources and Infrastructure

China's manufacturing environment remains highly advantageous due to its expansive labor pool, excellent infrastructure, and other favorable factors.

While concerns about rising labor costs exist, factors such as worker productivity, efficient logistics, and access to local suppliers often balance these costs. These factors contribute to mitigating the impact of labor costs on businesses.

Chinese workers possess greater experience, education, and resources compared to counterparts in competing countries, making China a cost-efficient option.

The country's vast labor pool ensures access to specialized expertise, and its improving university rankings reflect a new generation of educated and competitive Chinese workers.

 

3. China’s Innovation and Emerging Industries

China's business landscape has evolved from copycats to pioneers of innovation. This transformation highlights the importance of not overlooking its vast market and dynamic innovation.

With significant investment in research and development, China leads in areas like e-commerce, fintech, and artificial intelligence, rivalling advanced economies. China's billion-strong internet user population and thriving fintech industry provide advantages for data-driven innovation.

Global trends influenced by China, such as TikTok, demonstrate the importance of learning from the Chinese market to shape global business models. Investing in China not only taps into a massive market but also fosters valuable experience and enhances innovation and competitiveness worldwide.

 

QFI China and Internationalized Products

Introduced in 2013, the Qualified Foreign Investor (QFI) is a collective regime that includes Qualified Foreign Institutional Investor (QFII) and RMB Qualified Foreign Institutional Investor (RQFII) schemes, which merged into one.

The merger and relaxed China QFII rules make it easier for foreign traders to apply and invest in China's trading market. This one-time application comes with relaxed entry criteria and simplified application documents. All these also comes with a reduced approval time once the application documentation fulfils China Securities Regulatory Commission (CSRC) requirements.

China expanded the range of onshore derivatives available to foreign traders and QFIs on November 21, 2021. It aims to provide more trading opportunities for foreign traders in the Chinese market.

The QFI scheme allows investors to trade commodity futures, commodity options, and stock index options.

 

How to Trade in the China Market?

Figure 1. Source: Orient Futures Shanghai: Ways to Access China Futures Market

 

Access to China’s Futures market has been made more accessible with the diversification of schemes. As shown in the above diagram from Orient Futures Shanghai, traders can choose to trade through overseas intermediaries (Orient Futures International Singapore), QFI (Qualified Foreign Investor) schemes, or PFM WOFE.  Currently, there are 14 futures and 9 options available in the internationalized product schemes, 27 futures, and 19 options available in the QFI scheme. 

 

Trading Commodity Futures in the China Market

Figure 2. Source: Orient Futures Shanghai Webinar: How to Participate in Trading Internationalised Products.

 

International traders can trade QFI and China Internationalised products through Orient Futures Singapore. Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), Orient Futures Singapore have direct access to trading, clearing, and settlement to Futures and Options products from China.

These QFI and internationalised products from China include Soybeans Futures, Rapeseed Oil Futures, Crude Oil Futures, and more.

 

Start Trading With Orient Futures Singapore 

Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.

Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG). Starting August 2023, corporate clients can also gain access to the B3 Exchange through us.

We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.