Industry News
Chinese overseas investments to increase 30% in 2018

In an interview with China Times, Ms. Lingling Wu painted a cautious, yet optimistic picture of what the future holds for the international investment market.

 

  • Outward Chinese investment is increasing year-on-year
  • Decline in popularity of purely real estate related investments
  • In 2018, overseas investment growth in China is expected to reach 30%.

 

Optimising the overseas investment industry

The State Administration of Foreign Exchange of the People’s Republic of China recently issued an announcement that that it plans to increase FDI into Shanghai and Shenzhen to US$5 Billion, with Deputy Director of the International Market Research Institute at the Ministry of Commerce stating that in the second quarter of this year, foreign investment will continue to accelerate with the AGR expected to reach 30%. Official data released by the Ministry of Commerce shows that in Q1 2018, Chinese investors made direct investments in more than 2,000 foreign companies totalling more than US$25.5 Billion; this represents a yearly increase of 24.1%.

 

Lingling gave several reasons for this trend, stating “Overseas investment and globalisation are closely linked. In conjunction with economic development, the number of overseas Chinese investment companies is increasing each year as the government encourages foreign investment and as countries optimise their domestic policies in order to attract more global investment. Changes in investor mentality have resulted in a greater demand for reliable investment with a value-added dimension. This makes investment choices more selective and helps in providing reasons for the steady rise in overseas investments”.

 

As the global investment industry develops at a rapid pace, so to do investors preferences. And while there has been a marked decline in the popularity of purely real estate related investment, other sectors now coming to the forefront. Lingling echoes this point, stating “Future investment projects will tend towards the development of pure financial assets, high-tech entrepreneurship, medical and livelihood related industries”.

 

Risks still exist

However, although there is tremendous potential in overseas investment, Lingling cautions that risks still exist, “As overseas investments and globalisation are inextricably linked, in some ways there is homogeneity in assets, particularly liquid assets. For example, the growth of the US stock market last year played a leading role in the development of the Asian and European stock markets. Therefore, when formulating your portfolio or investment strategy, you must make clear strategic considerations while maintaining a future focus”.

 

Overcoming these risks

Strategically speaking these risks can be overcome by “paying close attention to updates in a country’s policy towards overseas investments”. Lingling concluded by surmising that “We must strive to understand the local economy and political situation present in a certain jurisdiction. Doing this will enable us to better understand the risks and challenges, thereby providing investors with a more feasible investment plan”.

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