The Chinese economy has undergone remarkable growth and transformation in recent decades, attracting the attention of global investors.
The Qualified Foreign Institutional Investor (QFI) scheme and the launch of Internationalized products have emerged as a crucial channel for foreign investors to access China's dynamic market.
This article explores the current economic outlook for China and the significance of the QFI scheme in shaping future prospects.
China Economy
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.
KPMG's news report reported that the recent GDP growth was mainly due to a strong recovery in local spending. This is because consumer’s confidence has improved following years of pandemic-related restrictions.
Additionally, exports have played a crucial role in driving growth. A 14.8% increase in March contributes to the robust performance in the first quarter.
The resilience of exports can be attributed to a shift in China's export structure. There has been a greater focus on markets like ASEAN and the Middle East, where economic performance has been more positive. This reduces reliance on economies such as the United States (US) and Europe (EU).
However, it is expected that exports will slow down in the second half of 2023 due to a cooler global economic environment.
Although the Chinese real estate market has shown improvement since 2022, it has been slowing down in recent months. If this weakness persists, it could pose a challenge to China’s economy. This is due to the real estate sector having significant contribution to China's overall GDP growth.
Additionally, external challenges, including geopolitical tensions like the ongoing conflict in Ukraine, could impact the global economy throughout the year.
However, despite the slow start to the first half of the year, Reuters reported that banks are still predicting China’s GDP growth to be between 5.1% and 5.7% by the end of the year. Other forecasting institutions still project that China's GDP will eventually surpass America's in the 2030s.
China announced that they will be introducing a new series of stimulus measures this year. The measures aims to revitalize its economy.
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.
China introduced this scheme to help facilitate foreign investment in the Chinese market.
The QFI scheme grants permission to qualified foreign institutional investors to invest in the Chinese trading market. This comes with certain specified investment quota and guidelines set by the Chinese regulatory authorities.
The QFI program was part of China's efforts to open its capital markets to foreign investors and promote internationalization of its financial system. It aims to attract foreign capital, boost liquidity, and bring in expertise from global institutional investors.
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 in the commodities market such as commodity futures, commodity options, and stock index options.
How to Trade in the China Market?
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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 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
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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).
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.
