Signals Beijing is preparing to unleash the buying power of Chinese individual investors on overseas markets may have some stock brokers salivating at the prospect the new money can add another leg to Wall Street's record-breaking rally.
But reality may be different. Chinese investors so far have shown little enthusiasm for owning foreign stocks under limited investment schemes available in China and are more likely to channel their money into real estate.
The central bank said in January that planning for the trial of a domestic individual investor program would be a top priority this year and other statements, including from senior officials this month, supported allowing more freedom for money to flow out of the country.
That has raised expectations that a wave of fresh funds may be about to head into global markets.
"This may unleash a significant and growing amount of investment capital held by Chinese individuals into global markets including global stock markets," George Askew, U.S.-based equities analyst with Stifel Nicolaus & Co. wrote in a research note distributed to clients.
Chinese savers had more than 44 trillion yuan ($7 trillion) in personal deposits in Chinese banks in April, central bank figures show. If they invest 10 percent of their savings in foreign stocks - a conservative measure of portfolio diversification - they would spend some $724 billion in offshore bourses.
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Although overseas stock markets - in particular those in the United States - have strongly outperformed Chinese indexes, mainland investors have been reluctant to own shares in foreign companies and analysts say regulatory tweaks alone are unlikely to change this attitude.
Scarred for Life
China's Qualified Domestic Institutional Investors (QDII) program, which offers mutual funds in overseas assets for sale to Chinese retail investors, has largely flopped.
Despite Chinese passion for foreign real estate, as rising prices from Vancouver to Singapore and London illustrate, regulators can not seem to give QDII quotas away.
The regulator, the State Administration of Foreign Exchange (SAFE), currently allows up to $44.7 billion in Chinese money to be invested under the QDII scheme. But less than a quarter of that amount has been taken up, data from Chinese fund analysis firm Z-Ben Advisors shows.
And the situation appears to be worsening. Even as the Standard & Poor's 500 index has set new records this year on Wall Street, assets under management in the QDII were shrinking.
Earlier this year, two Chinese overseas investment funds, targeting U.S. home builders and Japanese equities, respectively, failed to raise enough money for inception.
"We were aggressively promoting the funds, but people were just not interested," said Shawn Liu, Shanghai-based managing director of one of the funds, AZ Investment Management.
Even QDII exchange-traded funds (ETFs) that passively track familiar indexes in Hong Kong have seen subscriptions fall.
An ETF tracking the Hong Kong's benchmark index, the Hang Seng, run by E-Fund Management, attracted 1.6 billion yuan when it started in 2012 only to see that shrink to 198 million by March 31, data on the company's website shows.
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China Asset Management Company's QDII ETF that tracks the Hang Seng China Enterprises Index, or Chinese companies listed in Hong Kong, saw funds of 3.59 billion yuan at inception in August 2012 deflate to 304.2 million yuan by the end of March, the firm's website shows.
QDII was originally aimed at channeling part of China's massive savings abroad to help reduce inflationary pressure at home and serve as a test bed for the opening of China's capital account.
Launched during China's equity bull run in 2006, the program attracted huge interest initially. But the global financial crisis dealt a severe blow to QDII investors -- some lost as much as 70 percent -- prompting the government to suspend the scheme until 2010.
While the U.S. stock market has consistently outperformed mainland indexes since then, the losses scarred many investors.
In fact, QDII fund managers say the recovery of foreign markets has only increased redemptions, as investors who refused to sell at a loss earlier take advantage of the overseas bull run to cash out.
Analysts say other challenges need to be addressed in order to restore confidence among Chinese retail investors.
For one thing, exchange rate risk is an issue. The yuan has gained 1.77 percent this year against the dollar, setting consecutive record highs on a weekly basis since April.
"The Chinese know there's a lot of pressure for the renminbi to appreciate. Investing overseas you're going to be battling that wind," said Olivier d'Assier, managing director for Asia Pacific at Axioma, which recently signed an agreement to help create indexes for the China Securities Index Co. Ltd, which runs the CSI series of indexes tracking Chinese A-shares.
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But the biggest problem is widespread suspicion of stocks as an asset class.
Chinese equities have not produced the historical returns one would expect from an economy that until recently grew at double-digit rates every year for three decades.
At the same time, Chinese investors have found places to put their money, specifically high-yielding wealth management products in China and in property, which are perceived to be less risky than stocks.
However, if the central bank's trial program does allow individuals to invest directly, instead of having to rely on mutual funds, it will address one major reason for QDII's unpopularity, namely the reputation of the domestic mutual fund industry.
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"I don't trust Chinese fund managers," said Fu Shuaiwei, a 47-year-old investor, who lost money on QDII investments and now only puts money into domestic capital markets.
If China does open the gate for domestic individuals to invest overseas directly, Fu said he will manage his own portfolio. But he's still cautious.
"I would test the water with less than one tenth of my money," he said. "I won't bet big because I don't understand overseas markets well enough."