Foreign investors are not afraid of political and economic risks to increase their positions in the Chinese market

WASHINGTON 

Despite a marked slowdown in the Chinese economy over the past year and various government regulations and crackdowns, China has attracted a record amount of international investment, and Wall Street is more enthusiastic about the Chinese market than ever before.

China's Ministry of Commerce said on Thursday (January 13) that China achieved double-digit growth in foreign investment last year, attracting foreign investment to a record high. Among them, the high-tech industry, which competes fiercely in the United States and China and is frequently suppressed by government regulation, increased by 17.1%.

2021, which has just passed, seems like it could have been a disturbing year for international investors. Last summer, Chinese technology stocks were sold off in a massive sell-off amid the sudden regulatory storm unleashed by the Chinese government. The Nasdaq Golden Dragon China Index lost more than $500 billion in market value in a few days at the end of July. Wall Street suffered heavy losses. Feeling uncertain about the future. Since then, all kinds of negative news have continued, and various sudden suppressions and tightening of supervision have caused the private industry to suffer the most severe blows in decades one after another, and China's once-explosive real estate industry has also fallen into Unprecedented panic, some structural contradictions in the Chinese economy have become more and more prominent.

However, in addition to the data from China's Ministry of Commerce, the latest data from Preqin, an international investment research firm that has been tracking Chinese venture capital deals since 2000, shows that international venture capital investors will pay more attention to Chinese start-ups in 2021. Investment hit a new high, with a total of $129 billion invested in more than 5,000 start-ups in China.

Not only has China attracted record levels of investment into the tech sector, the Wall Street Journal reported on Wednesday, but, unlike previous years, most of the money in the past year went to industries that Beijing prioritized the most.

In addition, the Institute of International Finance, which includes all of the world's major commercial banks and financial investment institutions, said this week that Chinese stocks attracted $12.5 billion in inflows last month, while bonds attracted $10.1 billion. All emerging-market stocks outside of China attracted just under $3.8 billion.

Wall Street flocks to China market

Wall Street has been eager for years to squeeze into the world's second-largest economy, and it finally got what it wanted last year when China's economy was fraught with economic crisis, a spate of crackdowns on private companies and U.S.-China relations continued to deteriorate.

In August last year, after Citigroup became the first foreign bank approved to open custody business in China, JPMorgan Chase was approved by Chinese regulators as the first wholly foreign-owned securities firm. Its chief executive, Jamie Dimon, praised China as the "One of the greatest opportunities in the world".

Chinese regulators then announced in October that Goldman Sachs Group Inc. (GS) had also been approved to set up a similar enterprise to wholly hold its application for securities business in China, another step towards opening up to international financial institutions one step.

BlackRock (BlackRock), the world's largest asset management company, also announced that its wholly-owned subsidiary in China, BlackRock Fund Management Co., Ltd., has obtained a business license from the China Securities Regulatory Commission. ) to carry out business activities, becoming the first foreign asset management company approved to carry out public fund business in China. The company last year advised investors to triple their investments in China, and in September it said it had quickly raised $1 billion in funding.

Foreign-controlled securities firms in China that have increased since last year also include Morgan Stanley Securities (China), Credit Suisse Securities, UBS Securities, DBS Securities, and HSBC Qianhai Securities.

A recent Bloomberg News report revealed that Morgan Stanley is seeking five new banking licenses in China this year, while Goldman Sachs Group Inc. is working to double its workforce. Citigroup applied for a securities trading and investment banking license last month and plans to apply for a futures license this year.

In the latest such news, Shanghai-based Citibank China Co., Ltd. (Citibank China) announced Friday (January 14) that it has become one of the first to provide services to China's third stock exchange, the Beijing Stock Exchange. Foreign banks for clearing and settlement services. In addition, at the end of December last year, HSBC Holdings Co., Ltd. also held 100% of the shares of HSBC Life Insurance Co., Ltd. from foreign capital to sole proprietorship.

Jacob Gunter, senior economic analyst at Mercator China Research in Germany, said that from a portfolio perspective, companies will invest where the return on investment is the best, and China is another reason why foreign capital is attractive. Yes, the economies of many other countries have been devastated by the virus pandemic. "While China's overall growth rate is slowing, it's still better than the rest of the world," he said in an interview with VOA. So investing in Chinese factories, Chinese industrial companies, is in the eyes of Wall Street investors and investment funds. within reason."

Ganjack, who resigned last year as the policy and advisory manager of the European Union Chamber of Commerce in China, said that although China has introduced some severe regulatory measures, they are still relatively limited to a few industries, such as Internet technology companies, educational tutoring, cryptocurrencies and real estate. etc., does not touch many other sectors of the economy,

China still has good investment opportunities to drive strong returns, and many companies have great potential to rival Silicon Valley.

"A lot of small companies in particular, they're currently operating off Beijing's radar, and a lot of Wall Street investors see that and they think it doesn't cost much to invest in some of these startups in these emerging tech companies," he said. But the returns can be very, very high."

KPMG, an international accounting firm, recently stated in a macroeconomic trend outlook report that China's foreign investment in 2022 will remain at a high level. Competitive advantages are still attractive to foreign capital.

"Given China's importance in the world economy, you're not Goldman Sachs if you don't participate," Goldman Sachs chief executive Salomon said at the Bloomberg New Economics Forum in Singapore in November. Government pressure, "but we're looking at this from a 10-, 20-, 30-year perspective, not the next few years."

Executives only calculated the economic account?

For China, Wall Street is one of the few true "old friends" in American society. Although it has experienced various violent political and economic turmoil for decades, it has never given up on China along the way. China experts pointed out that one of the important reasons for this is that China is the second largest economy in the world and is gradually replacing the United States as the largest economy.

Ian Bremmer, president of Eurasia Group, a political risk consultancy, said recently that executives at major companies even plan to double down on their investments in China in the future. "I talk to CEOs of Western companies almost every day, and I'll tell you that, in general, most of them are planning to do more in China in the next 10 years, not less," Bray said. Mo told Yahoo Finance last week. “The reason is simple. It’s because China is going in a positive direction, by 2030 it will be the world’s largest economy, and companies will ultimately have to find a foothold where their markets are.”

But on the other hand, more and more analysts are also beginning to question whether investing in China will really pay off handsomely. They pointed out that, apart from factors such as political risks and national security in US-China relations, in terms of stock market investment alone, the performance of Chinese stock market investment returns is far less than that of the United States.

The Shanghai Stock Exchange's composite share price index has posted negative growth over the past year, down 45 points, or -1.27%, on Friday from a year earlier. By comparison, the U.S. S&P 500's compound annual growth rate is more than 20%.

Leland Miller, chief executive of China Beige Book International, an economic research firm, said many of China's serious problems today are completely underestimated by most people who pay attention to China. He pointed out that in the policy-making world, the talk is basically about the threat of China's rise, while in the Wall Street world, people talk about how to see how to get rich in this fertile land. "But there isn't enough discussion right now about the enormous challenge China faces over the next 20 years," Miller said at a panel on the Chinese economy hosted by the Hudson Institute this week.

He questioned whether China would continue to climb to the top of world domination in a straight line after rising for 20 years.

Ganjack, who has served in Beijing for many years as a Western trade official, said that although it cannot be said that investors in Western countries do not understand China's political system, executives on Wall Street generally only calculate economic accounts in the decision-making process, and pay more attention to economic data. Ignore politics: "They look at data from companies and annual reports, they look at market forecasts and how risk and reward are done, but they don't take politics into account."

He said the executives made decisions in the same way they did in the U.S. and did not take into account the unique nature of a one-party state and one-party system.

Morrich, a professor of economics at the University of Maryland, said that although American investors also knew that China was politically risky, they believed that they were sure that it would eventually harm the overall situation.

Intel, the U.S. semiconductor company, recently caused uproar in China over Xinjiang-related remarks, leading the company to finally apologize to the Chinese public. "For me, the biggest problem in China is like what happened to Intel," Morrich told VOA. "We have some people who will make a little slip of the tongue, including the bottom management, and they (China) will be very angry, There will be a lot of grievances to the U.S. But for now, most companies think they can handle it.”