Jing Ulrich, China Markets Investment Banker The slow but steady removal of the long-standing state share overhang, combined with the gradual opening of the capital markets to foreign investors is adding to the China craze already apparent in global demand for H-shares. The relaxation of qualified foreign institutional investor (QFII) requirements and the approval of strategic foreign investors in A-share companies allow investors to gain exposure to a market few outsiders have paid much attention to. 'A shares have been the worst-performing asset class over the past 10 years. There's this fundamental disconnect between China's economic growth and the falling capital markets, but I expect mainland-listed shares will soon be included in global indices and account for a larger and larger proportion within the next three to five years,' Ms Ulrich says. Unlike many of her counterparts, Ms Ulrich agrees with the logic of the government moratorium on new listings. 'Given the market conditions last year, the uncertainties, the market didn't have any appetite for IPOs and any large new listings would have crushed it,' she says. But she also points out that the primary purpose of capital markets is to raise funds and without IPOs they cannot function. 'Investors are crying out for high-quality, large-cap names to be listed,' she says. As for the companies that are already listed, Ms Ulrich expects the A-share market to polarise quite rapidly. 'Names like Yangtze Power and Baosteel are being sought after, but the companies with poor corporate governance, illiquid shares that are possibly speculative in nature will be shunned by global investors,' she says. 'For mainland exchanges to be credible venues for Chinese companies to list, we need to improve the quality of the companies listed there.'