The Golden Hordes.(Business)

Byline: Stephen Glain

China's surprisingly steely retail investors are snapping up billions of dollars of foreign assets.

As China's late helmsman Deng Xiaoping declared, "To get rich is glorious." But according to Zhou Xiaochuan, China's current central-bank governor, to diversify is imperative. For the last several months, Zhou has been stumping across the country for outward-bound investment, encouraging China's legions of individual investors to start spreading their savings abroad. Last month Zhou and his fellow financial mandarins were rewarded when the Shenzhen-based China Southern Fund launched the country's first-ever international mutual fund on Sept. 12, raising more than $4 billion in a single day -- the bulk of it from average retail investors.

The offering speaks volumes about the potential power of Chinese investors on the world stage. It's not the first time Asian retail investors were supposed to reshape the global economy. Back in the 1980s, everyone expected the Japanese to flood the market with their voluminous savings. Yet two decades on, most still park their savings in low-interest bank deposits. In China, however, mutual funds this year surpassed bank deposits as the country's favorite way to invest. Even though they are a lot less rich, the Chinese are already more daring with their money than the Japanese. "This story is underappreciated by the international community," says Hongbin Qu, the Hong Kong-based chief China economist at the Hong Kong & Shanghai Banking Corp. "The globalization of China's capital accounts will have as much of an impact on the world economy over the next few years as its cheap labor force has had for the last decade."

Since September, four Chinese fund-management companies have raised nearly $30 billion in retail investment for foreign markets. Most recently, China International Fund Management raised nearly four times its quota of $4 billion on its first day of sales. The CSF launch was oversubscribed by more than three times its initial $2 billion quota, which was doubled in response to furious demand. Assuming that global market conditions don't deteriorate, analysts expect an additional $500 billion (15 to 20 percent of Chinese savings) to flow to international markets over the next few years. According to JPMorgan's Hong Kong office, Chinese investors are opening mutual-fund accounts at a rate of more than 50,000 per day; nearly half of such funds are joint ventures ...