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Background Information
China's market economy is the second largest economy in the world based on GDP. China has become the centre for global manufacturing, and now has the largest manufacturing economy in the world and is the largest exporter of goods worldwide. China also has the fastest growing consumer market and is the second largest importer of goods in the world. China plays an important role in international trade and has become the second largest trading nation as of 2016. China have been a part of trade organisations and treaties and became a member of the World Trade Organisation in 2001. China have developed a number of free trade agreements with several different nations, including Australia, Switzerland, South Korea, Pakistan and New Zealand. China has two stock exchanges, the Shenzhen Stock Exchange and the Shanghai Stock Exchange with the value of the stock market being $4.48 trillion as of November 2014, earning itself the title of the second largest stock market in the world.

Analysis
There is a multi trillion dollar institutional investor market in China. The Boston Consulting Group emphasises in a report published in July 2017 that China has a promising new market for investors. China's economic model has changed from one focused on export development to one that seeks new sources of growth through domestic consumption and more open markets. Being part of a free trade agreement allows those countries who are involved to have access to China's financial services market for their country's banks, insurers and securities as well as fund manager. Australia is one of twelve countries to be granted access to the RMB Qualified Foreign Institutional Investor Program. This will give Australian superannuation holders access, through their funds and management, to shares in China.

Stock Exchange
Mainland China’s two stock exchanges both have A share and B share markets. A shares are denominated in RMB whilst the B shares is operated in foreign currency. The foreign currency used is in Hong Kong dollars in Shenzhen and US dollars in Shanghai. The A shares are closed off to foreign investors with the exception to a select number of institutions from overseas and is used by Chinese companies. Qualified Foreign Institutional Investors who have special permission from the Chinese government can participate in this market. The B shares are open to both Chinese and foreign investors. There are 1343 listed companies on the Shanghai Stock Exchange, whilst there is 2034 listen companies on the Shenzhen Stock Exchange. By adding foreign investors into the A shares mix, this opens up significant inflows of funds into China's market.

Risks
There are a number of risks to be considered when investing in the Chinese finance industry. Economically, China has been slowing down in recent years. It is the 21st month in a row that Chinese imports have declined, and exports have declined by 4.4% which has been a trend in 12 out of 13 of the past months. China's GDP growth has also been on the decline and China has a rising debt level resulting in the Shanghai composite index to decline by 20%.

Benefits
There are a high number of benefits of investing in the Chinese finance industry. As one of the world's largest economies, China appears to be an attractive market to invest in. China's economy has grown more than 90 times since 1978 and has survived a number of economic downturns and has still shown growth during these periods. Analysts have predicted that China will overtake the USA as the largest economy in the world by 2027. People want to invest in a market with great potential and as China is growing into a consumer driven economy with less emphasis on saving and become more of a free market economy, the country will become a more investor friendly market. China also has a population of 1.351 billion in 2012 which means there is a large population base to produce goods and invest in the market, increasing the potential of the country. China's population is made up of consumers who are willing to pay premium price for a product or service. This increased the market's potential spending power increasing the potential size of the market. China has a single party political system, and this provides political stability for the country and are at a low political risk. Investing in a county with a stable political environment is an important consideration. Additionally, international companies choose to relocate their business or manufacturing to China due to the low costs associated which in turn creates a more stable economy and flow of jobs for people in China, adding to the credibility of the country.

Banking System
Investing specifically in China's finance industry requires some insight into China's banking system. China used to operate under a monolithic system using the People's Bank of China as its central bank. In the 1980s, the Chinese government opened up the banking system to state owned specialized banks. These were the Bank of China, Industrial & Commercial Bank of China, Agricultural Bank of China and the China Construction Bank. These banks were created for the purpose of accepting deposits, conducting bank business, and for lending. Each bank is offered on the public listing and are owned partly by the public, but majority by the government. The four big banks controlled $45.9 trillion RMB at the end of 2010 and about 48% of all of China's assets.

Conclusion
Investing in the Chinese financial industry comes with its risks, however given the bank's strong reputation and success in the past, it opens a lot of opportunities for both local and international investors. Economically, China stands in a good place overall despite China's recent declining numbers and rising debt levels. The future of China has the potential to grow and expand to an even larger economical force that it already is. On paper, the benefits of investing in the industry far outweigh the risks especially in a country that has one of the largest economies in the world. China's two main stock markets, the Shenzhen and Shanghai stock exchanges both offer a wide range of availability of stocks in every industry. Specifically, the financial industry in China has produced quality returns for investors in recent times as the Bank of China has reached its highest stock levels since August 2015. Earnings are improving and bad debt is stabilising, which are positive outcomes for investors or or people looking to potentially invest.