Asia-Pacific economies will not meet the growth expectations of international business because of the slow pace of regulatory reform in China, a magic circle firm has warned.

A survey of large international businesses conducted last year by Allen & Overy predicted that by 2020 six of the nine most important stock exchanges in the world would be in Asia, led by Shanghai, Mumbai and Hong Kong.

However, worldwide managing partner Wim Dejonghe last week sounded a cautionary note: ‘I would challenge the idea that it will go that fast,’ he told the firm’s ‘The business of law’ seminar.

The survey’s prediction that Shanghai would be number two was a particular surprise, Dejonghe noted, given the restrictions it works within, ‘such as those relating to the FX control on the RMB [renminbi]’. The exchange is not entirely open to foreign investors due to the tight capital account controls exercised by the Chinese authorities.

The greater convertability of the renminbi resulting from the Shanghai exchange becoming a credible international player would create its own problems, Dejonghe said. Convertability would bring with it greater speculative activity and potential financial instability.

Large international businesses’ faith in Asian markets may reflect their own financing needs, rather than a considered judgement about the role Asian markets will be in a position to play, he added.

The report’s findings were based on interviews with 1,054 respondents, centring on the shift from developed to developing markets.