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The outlook for China’s capital markets in 2021 remains positive thanks to recent reforms and the expected outperformance of China’s economy. However, investors will exercise greater caution too in light of recent volatility in China’s bond markets, tighter controls of technology companies and greater oversight on initial public offerings (IPOs), per BNY Mellon.

Key quotes

“Wider capital account liberalization will likely continue in an asymmetric manner. Although foreign inflows are highly welcome, domestic outbound flows will continue to face some restrictions, particularly during times of stress (such as episodes in February and March at the height of the global pandemic).”

“In the near-term, given recent bond market gyrations in China, developments in the equity markets over IPOs, and increased oversight of technology and fintech companies, there probably needs to be a confidence-rebuilding exercise, with a more stable framework in sight to reassure market participants. On the external front, it remains to be seen whether Beijing will re-engage with Washington D.C. with the aim of lifting ownership restrictions on Chinese companies by US investors.”

“In the short and mid-term, China’s government plans to focus on technology innovation to help create jobs and keep the economy humming and has made such plans a highlight in its most recent five-year plan. Much of this innovation may be funded through the capital markets, with new stock listings and bond offerings, so the outlook for China’s capital markets remains cautiously positive.”