Foreign investors are stacking themselves back in booming China

Foreign investors are stacking themselves back in booming China

Ivanhoé Cambridge, a group that invests in international real estate on behalf of the Quebec state pension system, had already invested $ 2 billion in China’s logistics sector in recent years. In June, when the coronavirus was raging around the world, the company decided to add another $ 400 million to the grand total.

“We have certainly tried to increase our involvement in logistics in China as quickly and responsibly as possible,” said George Agethen, senior vice president for Asia-Pacific at the Canadian company, which indicates a “difficult environment”. in which to make an investment decision.

“There is great interest in investing in China and in Chinese logistics. . . everywhere, ”he added. “I don’t know a single investor who doesn’t think it’s a good idea.”

Foreign direct investment in China plunged earlier in the year as the coronavirus emerged within its borders. But its swift recovery from the pandemic, as well as the chaos the virus wreaked elsewhere, is now fueling a flood of money into the country.

If you look at the urbanization. . . The consumer spending that has developed in China – foreign investors have consistently tried to find a way to invest in this mega-issue

This shift could support China’s longer-term plans to expand domestic consumption and gradually liberalize foreign exposure in its industries, even after knocking down some of its largest conglomerates and the capital flows they have fueled over the past decade.

Official data shows that foreign direct investment in China rose for the seventh consecutive year in October, up 18 percent year over year to Rmb 81.9 billion (USD 11.8 billion).

Last month, Zong Changqing, an official with China’s Commerce Department, said investors see the country as a “safe haven”.

Rising FDI, due to the recovery, reflects a bigger boost to funding in China’s financial markets, which helped bring the renminbi to its highest level in years. The economy is expected to grow 2 percent this year compared to other declines.

“What it shows is that China is an attractive place to invest, just as it is attractive for portfolio flows,” said Alicia Garcia-Herrerro, chief economist for the Asia-Pacific region at Natixis. “Overall, the relative growth is better and the return is higher.”

Natixis said that if Hong Kong-China mergers and acquisitions were ruled out, activity in sectors such as real estate, ICT, e-commerce and consumer goods industries would have increased the most. Such sectors often rely on the Chinese market for an end in itself, and tie in with the country’s next five-year plan to focus the economy on domestic production to serve their own consumers.

Greater interest from foreign investors results from an investment crisis between China and the USA. Despite the geopolitical tensions this year, the coronavirus pandemic is now helping to accelerate longstanding investment trends in the country.

Like e-commerce, the logistics sector also takes advantage of increasing urbanization and consumer demand in China. JPMorgan Asset Management entered into a $ 600 million joint venture with Chinese logistics company New Ease this year, which invests in assets on behalf of North American, European, Middle Eastern and Asian investors.

“If you look at urbanization, the explosion of the Chinese middle class and consumer spending in China, foreign investors have consistently tried to find a way to invest in this mega-issue,” said Agethen.

According to Natixis, China’s outbound investment remains sluggish despite the increased inbound appetite. The country’s foreign direct investment overseas was booming from 2015 to 2017 due to the high activity of conglomerates such as HNA and Anbang, but subsequently declined.

According to Jean-Marc F. Blanchard, founding director of Wong MNC Center, a think tank in California, China’s FDI in 2019 was $ 77 billion, less than half the level in 2017.

Mr Blanchard said the decline had a political component as corporations played a high profile role that may have “given them the wrong government attention” – an issue he suggests is reflected in Ant’s recent failure, in Shanghai to list.

Chen Feng, chairman of HNA, was banned from flights and high-speed travel in September after the company failed to make legal payments. Originally an airline that borrowed large amounts to fund its overseas expansion into a global conglomerate, HNA was a major source of FDI in China between 2015 and 2017, contributing nearly $ 50 billion during that period.

Mr. Blanchard added that the Chinese government was “very sensitive to large sums of money” at the time because of the decline in foreign exchange reserves.

Signs of political support for the erosion of outbound investment coincided with greater openness to foreign exposure in various domestic sectors, particularly financial services, which has increased this year.

Adam Lysenko, associate director at Rhodium Group, a consulting firm, said foreign inflows are a priority for China as it eases its tight controls on capital outflows.

“The key to stability will be making sure that the immediate result is not a quick run to the exit,” he said. “This is a difficult balancing act for Beijing.”