Limited opportunities

The issue of investment opportunities was taken up by participants of a China business conference hosted by the Wharton School. While the country's production and export abilities have rapidly developed, its financial markets have lagged, according to experts at the meeting.

Even China's $1.4 trillion foreign exchange holdings are not so much a sign of strength, but proof that it lacks sophisticated investment opportunities for its wealth, according to participants.

An article in Wharton's newsletter argued that, China is "reaching a point where a shortage of financial innovation and investment opportunities will start to needlessly handcuff companies and the burgeoning investor class. As Chinese entrepreneurs rack up gains in their ventures, they are looking to diversify their personal investment holdings, and they are seeking a broader array of financial tools for their companies. So far, their government has circumscribed their options."

At the same time, the AmCham report points to significant recent changes in China's financial industry. Foreign banks and insurance companies can now hold stakes in financial institutions. Foreign banks can incorporate as local entities. New investment products have been introduced. Public ownership of banks has increased steadily and nonperforming loans have shrunk.

Though Beijing's strategy has been to court foreign participation to gain expertise while keeping it at an arm's length, it is a strategy that may be holding China back in a vital area of its economy.