Foreigners poured cash into China amid the coronavirus pandemic
A person walks past a Microsoft logo at the Microsoft office in Beijing, China on Aug. 4, 2020.
Thomas Peter | Reuters
BEIJING – Foreigners invested more money in China last year as the size and growth of the country has been stellar in a world still trying to fight the coronavirus pandemic.
In the capital, Beijing, foreign investors demanded more than a third of commercial real estate deals, an increase over previous years, property manager JLL said on Thursday.
“Beijing is expected to remain a good choice for foreign investors as the country’s capital is expected to show more signs of recovery sooner than most of the other major overseas markets,” Michael Wang, senior director of capital markets at JLL North China, told a release.
Covid-19 first appeared in the Chinese city of Wuhan in late 2019. The disease spread overseas and became a global pandemic within a few months. However, the outbreak in China stalled in the second quarter after authorities took tough measures to limit human contact. The government eased restrictions as local Covid cases declined, and China is expected to be the only major economy set to see growth for 2020.
The Chinese government wants to attract more foreign capital, be it in business projects or in local financial markets. Such involvement contributes to the international use of the Chinese currency, while foreign companies bring jobs, tax revenues and expertise to the local market.
Foreign direct investment at record high
Companies have also invested more money in projects in China in the past year, measured against foreign direct investment.
In November 2020 foreign direct investment was US $ 129.47 billion, according to official figures, up from the same period last year. This means that, according to Macquarie estimates published on Thursday, China is well on the way to record foreign direct investment last year.
According to Wind Information, China recorded FDI in 2019 of $ 138.13 billion, up from nearly $ 135 billion in 2018. Official Ministry of Commerce figures for 2020 are expected later this month.
In the financial markets, Macquarie estimates that foreign investors more than doubled their purchases of Chinese bonds last year, a record high of 1.1 billion yuan in inflows.
Long-term interest from foreigners
Growing foreign interest in China and the capital Beijing is part of the longer-term trend.
For example, foreign investors have gradually increased their share of transactions in the capital’s commercial real estate market. According to JLL, the share rose from 22% or a little more than a fifth in 2018 to 30% in 2019 and 35% in 2020.
Revenue of 47 billion yuan ($ 7.26 billion) in 2020 exceeded that of 2018, JLL said. The market was still suffering from the shock of the coronavirus – sales volumes were well below a multi-year high of 80 billion yuan in 2019, JLL said.
In recent years, China’s rapid economic growth and hundreds of millions of consumers have attracted international consumer brands, automakers, and financial institutions. To help the trend, the Chinese government has eased restrictions on foreign investment.
However, critics say the changes have been slow and unfair practices persist, such as the requirements for the transfer of key technology to do business in the country. Beijing’s tight capital controls also make it difficult for foreign investors to get their money out of the country.
At the highest level, the Chinese authorities remain publicly determined to attract more foreign investment. However, international investors are watching to see if the opportunity to make money is as good as it sounds.
As analysts on a reform tracker, The China Dashboard, they released it in their last report last week:
“Market participants are watching Beijing’s political priorities more than market forces. This has generally constrained liberalization of cross-border investment policy since 2013 and will continue to limit the potential until it is changed.”