Underlying strength in the economy and potential for growth make China a magnet for foreign investors, brokerage firm CLSA said in a report that predicts gross domestic product will expand 8 percent or more for the next two years.

"As China's nascent financial markets mature, there is significant potential for growth," Jonathan Slone, chairman and chief executive officer of CLSA, said at the 14th CLSA China Forum, which opened in Shanghai yesterday.

Slone said CLSA has provided consulting service for a string of foreign companies this year and he was surprised by their level of interests in investing in China.

As an active participant in China's financial industry, CLSA had a big step forward this year to expand its Chinese business.

Last month, CLSA signed an in-principle agreement to establish a joint-venture asset management company with Shanghai Guosheng (Group) Co. The move enabled CLSA to offer full services, including research, A-share broking and fund management to Chinese mainland clients, in addition to its existing A-share underwriting and advisory.

Besides, CLSA planned to raise investment under the Qualified Foreign Institutional Investor program, which allows individual foreign institutions to cash in on the mainland's stock markets, after the regulator announced to raise the investment cap from US$800 million to US$1 billion earlier this month.

"Our focus now is to work closely with our joint-venture partners to build our businesses and maximize returns for investors," Slone said.

"Our strategy is to replicate our core businesses onshore on the mainland and to increase revenues from China over the next three years to 10 percent of CLSA's total group earnings."

CLSA said it predicted China's gross domestic product may grow 9.2 percent this year and 10 percent next year.

But Slone said GDP is not a good measure and it is wrong to talk about "China's economy" because the country is so big that different regions have different economic situations.

"Wise investors should study 'Chinese economies.' Although some regions have very low GDP figures, they have huge potential. Instead, some areas, which have brilliant GDP, may see their economies contract and need reconstruction," Slone said.

(Shanghai Daily September 15, 2009)