To many outsiders, Chinese equity investing might conjure up images of a huge, freewheeling market where millions of retail investors revel in speculation and sustainability is an alien concept. But developments on the ground in China show how stereotypes like this are swiftly becoming outdated. China’s markets have been changing shape over the last decade, as institutional influence expands in the onshore market and foreign investors pile in.
This paper employs both a proprietary survey of voting data and anecdotal evidence from corporate engagements to demonstrate how investors, companies and regulators in China have all played a part in building what is today a solid foundation for sustainable investment and engagement. Indeed, the clear picture that emerges from our study is one of steady progress across the board when it comes to investment stewardship in China.
In this, Fidelity International’s first China Stewardship Report, we examine the underpinnings for these developments across three main areas. First, the key starting point has been a steady decline in ownership concentration, which has opened the door for non-controlling interests to play a more active role in the governance of companies.
Second, despite prevailing stereotypes the market has gradually rebalanced away from being retail driven: individual investors owned 95 per cent of free-float shares in 2003, but this fell to 70 per cent in 2010 and stands at just over 50 percent today.
Third, foreign participation has jumped over the last few years as China opens its financial borders, and this has helped bring domestic practices more in line with global standards.
