China has opened a path for a transformation of its financial markets that could see them match the U.S. in size and lure more than $3 trillion in capital from abroad by 2025, according to a study by Citigroup Inc.
While the country’s initial efforts to internationalize its currency hit a bump in 2015, policy makers have shifted tack to focus on developing domestic financial markets rather than opening up the capital account, Citigroup analysts led by Liu Li-Gang, chief China economist for the bank in Hong Kong, wrote in a note. Steps like the bond and stock "connects" with Hong Kong represent this new approach, they wrote.
"In years to come, 2017 could be viewed as a tipping point for global asset allocation," Liu and his colleagues wrote. "Removal of restrictions to entry, together with eventual inclusion of China in various global capital market indexes, will raise foreign ownership of Chinese assets, likely creating further momentum for market broadening and deepening."