China’s increasing prominence in the global market underscores the evolution of longstanding policies and cautious perceptions regarding the role of outside investors. The Mercer report The Inclusion of China A-Shares In MSCI Indices: Implications for Asset Managers and Investors, chronicles the journey that China and the international investing community have made together to reach this historic agreement, and what to expect from a new era of growth and collaboration. Before the MSCI breakthrough, the primary mechanisms that granted foreign investors entrance to China’s domestic market were the Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Institutional Investor (RQFII) schemes—both of which were heavily regulated by rules and regulations limiting the types and sizes of organizations allowed to apply for a quota and their ability to repatriate capital.
Chinese authorities, however, have made opening the mainland equity market a key priority. Executing this innovative strategy, however, required a disciplined and calculated approach to implementing change. China began by creating mechanisms to accommodate foreign investors. In December 2016, the Shenzhen-Hong Kong Stock Connect program was launched, providing foreign investors access to companies listed on the Shenzhen Stock Exchange. This forward-thinking initiative opened up the path to global influence and participation, with both China and the international investment community working together.