Investing in China

More and more Western investors are discovering China as a new market to invest in. The growing economy makes China a very attractive market to invest in. In the long term, China could take over the United States’ position as the largest economy. Every year the economy grows by at least six percent. Particularly in view of the fact that the rate of the yuan will have to rise in the long term, one can earn a lot of money by investing in China. China is becoming an increasingly popular market for investors to invest in. A few decades ago they were only a small economic player on a global level, but they have grown strongly. They are now the fourth largest economy in the world and many economists and analysts believe that they will eventually take over the position of the United States as economic market leader. China already makes 70 percent of all copiers and 55 percent of all DVD players. . China has a number of important advantages, namely low wages, a large potential sales market and an enormous openness of the economy.

Investing in China

The shares of Chinese companies are traded on multiple stock exchanges. The largest stock exchanges where these shares are traded are the Shanghai and Shenzen stock exchanges. In principle, Chinese investors are not allowed to invest outside their own country. China is experiencing negative real interest rates. This is the interest rate adjusted by inflation. It is not attractive for companies and private individuals to save. That’s why many of them start investing. Due to the enormous interest, prices are therefore rising rapidly. They are also not allowed to invest in Hong Kong. That is why shares in Hong Kong are a lot cheaper than in China itself.

Investing in China by foreign investor

It is also possible for foreign investors to invest directly in shares of Chinese companies listed on the Shanghai and Shenzen stock exchanges. It is possible to do this through various investment funds. These must have Qualified Foreign Institutional Investor status. This is a status that they can obtain through the Chinese government. It only grants this status to investment funds that it trusts and that are not too critical of the Chinese government’s policy.

Opportunities for investors in China

The Chinese stock market has risen sharply in value in recent years, even though it has sometimes suffered from crises, such as the Asian crisis in the 1990s. Chinese equity funds have also suffered from the credit crisis, even though most funds are growing again. That is why China is a market where the chance of success is quite high, especially in the long term. This is due to the exchange rate of the Chinese yuan. This has been kept artificially low by the Chinese government for years. She does this so that the country remains attractive to foreign investors. At some point, China will have to increase the rate of the yuan. This is because there will be so much demand for the Chinese currency in the future that it will no longer be feasible and will even be counterproductive if the rate is kept low.