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In conversation with Schroders Investment Management

From its joint venture with China's Bank of Communications to the upcoming establishment of a wholly-owned public fund management company, asset managers Schroders continue to invest in China

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In the lead-up to two events in Beijing and Shanghai celebrating the 50th anniversary of UK-China ambassadorial relations, FOCUS speaks to British companies that have experienced success in the Chinese market over the last half a century

In this second instalment, we speak to David Guo, Chief Executive Officer of Schroder Investment Management in China, about opportunities for investment in a post-Covid China in 2023 and beyond.

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Can you please tell us how and when Schroders entered the China market?

We set up our first representative office in Mainland China in Shanghai in 1994. Over the past nearly 30 years, we have adopted a systematic approach to business development in the Chinese market. First, we have leveraged our strengths as a global asset manager to meet diversified investment needs in the local market. Secondly, we have made continuous efforts to explore and develop our business scope and investment capabilities in China and provide Chinese investors with one-stop wealth management services. As one of the first international asset managers to enter the Chinese market, we have always actively responded to China’s financial opening-up policy and built strengths in relevant business segments.

As early as the 1860s, the firm of J. Henry Schroder & Co. was trading in tea and silk from China and was providing financial services for clients who had import and export business with China

What major successes and growth have you had during this time?

Despite the uncertainty that has shrouded the international financial market in recent years, Schroders has made some major progress in the China market. In February 2022, we set up our second joint venture with Bank of Communications, Schroder BOCOM Wealth Management Co., Ltd. As the third Chinese-foreign joint-venture wealth management company in China, this marked our formal foray into the bank wealth management market and wealth management services in China.

In January 2023, we were pleased to receive the China Securities Regulatory Commission’s approval for the establishment of our wholly-owned public fund management company (FMC), which is currently in steady progress with business preparation before regulatory onsite inspection. The WFOE FMC will allow us to deliver our global strengths in China in a complete manner.

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What are your thoughts and reflections on the Chinese market today?

In the short term, we expect to see signs of China’s economic recovery in its economic data for the first half of 2023. Structurally, domestic demand (real estate and its industrial chain, as well we consumer goods and services) may replace exports as the primary driver of economic growth. With the rise in global interest rates expected to be near an end, we believe that global capital will flow back to emerging markets, China being an appealing region among them.

In the medium and long term, we expect that China will shift from scale-based growth to high-quality growth. In recent years, the government has put a lot of effort into to guiding the economy towards high-quality growth. This will be a long process that requires patience, but we have seen many positive signs.

Considering China’s lead over Europe and the US in the current economic cycle (China is recovering amid recessions in Europe and the US in the first half of this year), we expect global capital to flow back into China and drive the valuation recovery of Chinese stocks. Manufacturing upgrading and domestic demand recovery are the most promising directions in our view.

We believe that the commitment to and intensity of emissions reduction, especially in developed economies, should not be underestimated, and that a decline in demand for relevant equipment may not materialise next year as expected. Manufacturing upgrading is crucial for China’s entry into high-income countries and is also in line with China’s policy guidance. Domestic demand recovery mainly refers to the real estate industrial chain and consumer services, where relevant industries have just started their recovery journey with more accommodative policies.

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How has CBBC supported you or British businesses during this time?

CBBC has always been a valuable source of help and support for our business development in China and has witnessed our rapid growth in the market. In the context of China’s significantly accelerated financial opening-up, CBBC has actively approached us to find out more about our vision for business development in China and the challenges that we may face, and has helped facilitate our communication with China’s regulators and government officials and enhance the trust and mutual rapport between British companies and the Chinese government.

In addition, CBBC has organised roundtable dialogues on topics of importance for the Chinese government, such as pensions and ESG. Such occasions provide an opportunity for us to share our inputs while also allowing us to be better informed about China’s regulatory developments and approaches so that we can plan our business accordingly to be better aligned with China’s strategic development goals at the national level.

What are Schroders’ ambitions and plans for the future in China?

Schroders is a financial institution with a history of more than 200 years that has always stayed abreast of the times. With China’s continued financial opening-up, we will leverage the synergy of our multiple onshore business units to provide more investment options for overseas markets and the Chinese market and bring new investment concepts and products to Chinese investors.

First, we are eager to bring more overseas experience to China and evaluate the elasticity and value of China assets from a global perspective. Secondly, we will draw upon our global investment research network and investor relations platform to provide global asset allocation help for domestic investors. Thirdly, as a sustainable investing pioneer, Schroders has a proprietary sustainability assessment framework and tools, and has embedded ESG considerations throughout the investment process. We look to share our experience and specialised knowledge with our partners in China and conduct further dialogues and cooperation with them on ESG best practices, investment strategies, and products.

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It merits noting that we are encouraged by the launch of China’s personal pension plan and by China’s determination to establish a robust pension product market. Pension investment is also a key field prioritised by Schroders in China. We will leverage our rich experience gained from managing pension products in overseas markets to play a constructive role in the development of China’s pension fund ecosystem. We are strongly positioned to serve China’s third pillar pension market through our China offices.

We have confidence in the growth of the Chinese market, which has always been a high-priority market for Schroders. Here, we will continue to step up our presence and bring more of our global resources and strengths for the development of China’s asset management industry.

With the disruption of 2022 now behind us, the China-Britain Business Council is excited to share the newly confirmed dates for our celebration of 50 years of UK-China Ambassadorial Relations dinner receptions in Beijing and Shanghai.

The Beijing dinner reception will be held on Tuesday 21 March 2023 at the Intercontinental Sanlitun and will be attended by senior officials from China’s central government, ministries, and regulators along with municipal and provincial leaders. Learn more about the dinner in Beijing here.

The Shanghai dinner reception will be held on Tuesday 28 March 2023 at Intercontinental Jing’an and will be attended by senior representatives from municipal and adjacent provincial government organisations.

The dinner receptions are an ideal opportunity for our members to engage with CBBC’s network of senior contacts in both the Chinese and UK Governments as well as key local enterprises.

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