Global capital is currently increasing its holdings of Chinese assets with historically significant momentum. From sovereign wealth funds to international investment banks, and from stocks to bonds, diversified capital inflows underscore the growing attractiveness of China’s capital markets. This is a structural shift driven by China's economic resilience, deepening institutional opening, and the rising competitiveness of its asset ecosystem, according to Jianghai Securities. "What we're witnessing is global capital recognizing China's capital market as a core component of long-term portfolios, balancing robust safety margins with compelling growth potential,” said a senior strategist at Jianghai Securities. “Its evolution underscores both its increasing effectiveness and irreplaceable allocation value.”

I. Institutional Opening Fosters a Market Ecosystem Aligned with Global Standards

The opening of China’s capital market has transitioned from policy-driven initiatives to institutional construction. By aligning rules and integrating mechanisms, the market is upgrading from providing mere “access channels” to achieving genuine “system integration”—a transformation Jianghai Securities identifies as “the key to unlocking sustained foreign capital inflows.” “Foreign financial institutions have made substantial progress in operating within China. Several globally systemically important banks, foreign-controlled securities companies, and wholly foreign-owned fund management companies have completed their market entry and are now deeply involved in market development.” the strategist explained. “The Qualified Foreign Institutional Investor (QFII) scheme has been continuously optimized, providing international capital with a more convenient participation environment.”

The connectivity mechanisms are consistently expanding and enhancing their efficacy. In this September, China Securities Regulatory Commission (CSRC) announced the inclusion of eligible ETFs in the Stock Connect programs between Shanghai, Shenzhen and Hong Kong, simultaneously optimizing trading and settlement mechanisms to facilitate cross-border investment.Jianghai Securities' research highlights that “This has further lowered cross-border investment costs and improved liquidity—critical factors for institutional investors seeking efficient exposure to Chinese assets.”

The Southbound Bond Connect, now in its fourth year, has become a cornerstone of two-way capital flow, while the expansion of cross-border ETFs and measures to boost GDR and CDR liquidity have diversified access channels. “These developments aren't just about increasing options—they're about enhancing the market's ability to allocate capital globally, a hallmark of an effective financial system,” noted Jianghai Securities. The full implementation of the registration-based IPO system, with its focus on information disclosure, has further aligned China's listing framework with global norms, while progress in cross-border audit regulatory cooperation has “created a stable, predictable environment that long-term capital demands,” the firm emphasized.

II. Enhanced Asset Quality and Structural Optimization Jointly Boost Investment Appeal

The improving quality of China's capital market assets, underpinned by a stable economic recovery, has significantly boosted their investment appeal—something Jianghai Securities views as “a fundamental pillar of global allocation demand.” “Industrial enterprise profits have rebounded this year, with manufacturing sector growth leading the way, reflecting the success of China's high-quality development strategy,” the firm's latest analysis pointed out. “The overall profitability of A-share listed companies has strengthened, with a high proportion of firms forecasting earnings growth. The sustained increase in dividend payouts and share buybacks highlights listed companies' enhanced awareness of shareholder returns and the growth of intrinsic market value—all signs of maturing, value-driven assets.”

Concurrently, technological innovation is injecting new growth momentum into the capital market. Breakthroughs in hard-tech fields like artificial intelligence, new energy, and biopharmaceuticals are driving rapid profit growth in related sectors. “International capital has notably increased its allocation to leading enterprises in science and technology innovation sectors,” said Jianghai Securities. “Hard-tech assets are gradually becoming a core component of foreign holdings, signaling a market shift from traditional cyclical drivers to innovation-driven growth.”

China's bond market offers another layer of unique value. “With their characteristics of low volatility and positive yield, Chinese government bonds stand out as a scarce, stable asset in the global fixed-income landscape,” Jianghai Securities noted. “They provide global investors with an effective hedging capabilities and yield enhancement, attracting sustained increases in holdings from numerous large international asset management institutions.This underscores the market's ability to meet diverse risk-return needs, a key indicator of its maturity and effectiveness.”

III. Market Ecosystem Optimization Elevates Long-term Investment Value

As the opening process deepens, the investor structure, risk management, and legal environment of China’s capital market are improving in tandem. The shareholding ratio of foreign investors is growing steadily, forming a diverse investor base alongside domestic institutions. Different types of capital, including sovereign funds, hedge funds, and fixed-income institutions, are deploying differentiated strategies, creating a multi-layered and complementary capital structure. This effectively mitigates market volatility and enhances stability.

“The financial derivatives market is developing steadily. The trading volume of instruments like stock index options and treasury bond futures has grown rapidly, and channels for forex hedging continue to expand,”Jianghai Securities explained. “This significantly increases the operational flexibility and confidence of foreign institutions for medium- to long-term asset allocation.”

Strengthened rule of law has solidified the market's foundation. The roll out of supporting measures for the revised Securities Law, increased penalties for violations, and the implementation of institutional measures to protect small and medium investors have all enhanced market transparency and predictability. “A standardized, transparent market environment reduces information asymmetry and builds trust—key factors that drive capital inflows and improve resource allocation efficiency,” Jianghai Securities emphasized. “The normalized de-listing system is advancing in an orderly manner. A more standardized, transparent, and promising market environment is taking shape.”

IV. Strategic Allocation Value Stands Out from a Global Perspective

The fundamental driver for the attractiveness of China’s capital market lies in the sustained, healthy development of the Chinese economy and its rising stature in the global economy—something Jianghai Securities describes as “the irreplaceable backdrop for its allocation value.” While maintaining reasonable growth rates, China has achieved significant results in economic structural optimization and upgrading. New growth drivers like high-tech manufacturing and the digital economy continue to expand, providing the capital market with a rich source of quality assets. “Currently, the global allocation to Chinese assets remains in its early stages, with the holding scale still lagging considerably behind China's share of the global economy. This allocation gap reflects past limitations in market openness but also indicates vast potential for continued inflows of international capital.”Jianghai Securities stressed. “As international index providers gradually increase the weighting of A-shares, both passive and active funds are beginning to regard Chinese assets as an indispensable component of their portfolios."

In Jianghai Securities' view, China’s capital market is undergoing a profound transformation driven by institutional opening, technological innovation, and structural upgrading. “From the facilitation of investment channels to the internationalization of market rules, from the profit recovery of traditional industries to breakthroughs in emerging technologies, and from the optimization of the investor structure to the improvement of the legal environment, multiple positive factors are converging to propel the market into a new stage of high-quality development,” the strategist concluded. “Against the backdrop of global economic uncertainty, China's capital market offers a unique combination of safety, growth, and liquidity—making it a key destination for international capital seeking long-term value. As opening-up dividends continue to be released and market vitality is further unleashed, it will play an increasingly important role in the global financial system, allowing investors worldwide to share in China's development opportunities.”

Company:​ Jianghai Securities Co., Ltd.

Contact Person:​Junwei Liang

Email:​liangjunwei@jhzq.com.cn

Website:​https://www.jhzq.com.cn

Telephone:​16620141985

City:​ Shenzhen, China