Chinese free trade good for funds sector: FSC
Australia's mooted free trading agreement with China will help create local jobs for Australian fund managers by building new architecture for financial services exporters, according to Financial Services Council (FSC) director of policy, Andrew Bragg.
In his opening statement to the Joint Standing Committee on Treaties last week, Bragg argued in favour of upholding the free trade agreement (FTA) with China on the proviso that it secures the ability for Australian fund managers to meet their client demand for exposure to the growth within China.
"Our comparative advantage in funds management is an industry that has the potential to become a major exporter of services in the Asian century," Bragg said.
"This deal provides preferential access to China's markets which has been made available to a very limited number of countries … [it] broadens access to markets in China for Australian fund managers."
Currently, China has just 90 asset management companies — compared to 483 licensed fund managers in Australia — but according to Bragg, it is "early days" for funds management in China as one third of the companies are "unprofitable".
If passed into legislation, the ChAFTA deal also provides Australia access to all three of China's schemes for trading and investment, allowing Australian fund managers access to Chinese share and bond markets in addition to opening up the opportunity to sell to Chinese Qualified Domestic Institutional Investors (QDIIs). There are currently 132 QDII firms in China, which Australian fund managers will now be able to access if the deal goes ahead.
"This agreement is an outstanding achievement for Australia. It will create jobs and growth by allowing our industries access to the world's largest market," Bragg said.
"It provides Australian fund managers with a significant advantage which is not enjoyed by large competitors such as the United States or Japan."
To help "boost the usefulness" of the China-Australia FTA (ChAFTA) and Australia's overall competitiveness, Bragg cited recommendations from the 2009 Johnson report which was commissioned by former Treasurer, Chris Bowen, to help secure Australia's future as a financial centre in Asia Pacific.
Bragg said the taxation and funds management collective investment regulations framework could see an overhaul with the development of new collective investment vehicle structures, more competitive tax rates and the implementation of multi currency classes fund capability.
"We need to compete in the Asian century … ChAFTA represents a starting position from which to build on," he said.
"It gives us a first mover advantage. Delaying the measures in the FTA would damage our future growth prospects and we recommend its swift implementation."
Recommended for you
Having launched its first active ETF for Australian investors earlier this year, iShares says this has helped the firm reach $50 billion in assets under management in Australia.
Recommending Platinum shareholders to enact the merger with L1 Capital, Morningstar has said it expects the combined firm will be able to moderate outflows and facilitate diversity in product range.
Elanor Commercial Property Fund has appealed to the Takeovers Panel regarding the takeover offer by family office Lederer Group, describing “disclosure deficiencies” in last month’s bidders statement.
Wholesale distribution is experiencing the most active hiring efforts as the decline in financial advisers means fund managers are focusing on high-net-worth investors and wealth managers instead.
