Shorten calls for investment drive in China

It is time for Australian fund managers to "let go of the side of the pool" and invest in China, Financial Services Minister Bill Shorten says.

Doing deals in China could be hard - "you hear of some companies getting their fingers burnt" - but the challenge was justified, he said in an interview in Beijing.

"There are more deals to be got than we realise," said Mr Shorten, who is leading a group of fund managers to Shanghai and Beijing.

"Of course you just need local knowledge, which is easy to say but harder to acquire," he said. "But there's an unwillingness to let go of the side of the pool."

Mr Shorten was at the Great Hall of the People on Tuesday night as Prime Minister Julia Gillard and Premier Li Keqiang signed a landmark political agreement that will see the Prime Minister, Treasurer, Foreign Minister and Trade Minister in annual meetings with their Chinese counterparts.

The two leaders listed financial services co-operation as a key priority, Mr Shorten said.

The "strategic partnership" was accompanied by a currency agreement enabling Australian dollars to be converted into yuan without first being changed into US dollars.

"It's the equivalent of having to change trains in order to get to a destination," Mr Shorten said. "Now we've got an express train."

Mr Shorten has also met China's central bank chief and securities and banking regulators, spruiking Australian capital and financial expertise and defending Australia's investment regime.

"Any Chinese investor knows it's easier for them to invest in Australia than it is for our people to invest here," he said.

Australian Securities and Investments Commission chairman Greg Medcraft agreed with Xiao Gang, chairman of the China Securities Regulatory Commission, to second employees to the Chinese organisation.

While politicians and officials still had work to do breaking down market access barriers, Mr Shorten said, fund managers had to stretch themselves into unfamiliar territory.

China buys nearly a third of all Australian exports, with the accounts dominated by iron ore and coal. The government wants to diversify from selling commodities by promoting financial market trade and investment flows.

China is home to the world's second-largest and fastest-growing economy but only a tiny fraction of Australia's $1.5 trillion pool of managed funds - the world's third-largest - is invested there.

"It is tiny and it will remain low for some time," said Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia.

"While you've got a lack of transparency, then fund managers and pensions funds are not going to invest."