Westpac's (ASX: WBC) head of Greater China, Andrew Whitford, believes Australian companies – particularly those in resources and agriculture – could have a lot to gain by establishing themselves in Shanghai's pilot new free trade zone in order to access investors from the world's most populated nation.
Chinese authorities are giving the exclusive area greater financial freedom than in the rest of the country. This comes as a major development as the People's Bank of China announced last month that foreign companies with operations in the zone could issue yuan-denominated bonds in the country's domestic market. It would also assist with the trading of yuan, the Chinese currency, which is expected to grow significantly in international commerce.
This creates an opportunity for Chinese investors to gain access to foreign firms looking to raise funds whilst also allowing them to directly invest overseas without having to gain pre-approvals. Some have even suggested that, should the pilot prove successful, the free trade zone could rival Hong Kong as the finance gateway into China.
Whitford said "I see companies that are involved in agriculture or… hard commodities that set up in the free trade zone would have enormous opportunities." It would prove to be a lot easier for them to raise funds in the region than it was prior to the free trade zone.
While ANZ (ASX: ANZ) has already confirmed that it will open a branch in the zone, Westpac itself is considering doing so, with the decision resting on the final make-up of the new rules to be issued by China's banking regulators. It would be a fantastic opportunity for the bank which already has a significant business in China.
Foolish Takeaway
In order to gain exposure to future growth in China, investors can look towards companies such as Warrnambool Cheese & Butter (ASX: WCB), Graincorp (ASX: GNC) or even BHP Billiton (ASX: BHP) which each offer products that will benefit China for years to come.
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