© 2018 by Integrale Advisors

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Brief Look on Chinese Investment Policies

March 27, 2018

 

With China and the U.S. reported to have quietly started negotiating to improve U.S. access to Chinese markets, it remains important for investors to understand the perspective of the Chinese government. New research suggest that the investment of Chinese ventures is set to reach $2.5tn throughout the following decade in spite of rising protectionism. Investors believe yearly sums to consistently beat the record set in 2016, the year preceding Beijing's wide crackdown on "nonsensical" arrangement making. Limiting the opaqueness from Beijing about what sorts of arrangements controllers will support will be pivotal to helping Chinese arrangements succeed. In the past, privately owned groups such as Anbang Insurance Group and HNA Group suffered blotched deals due clarity issues regarding ownership. Be that as it may, following a period of unclear directions from Chinese authorities, China's bureau explicitly outlined rules before the end of 2017, laying out the kinds investments that are supported and unsupported.  The rules welcome investments that meet China's modern approach; for example, securing cutting edge innovation and brand names, while investments in luxury products (i.e entertainment, sports, real estate) are discouraged. Even before those rules were outlined, state-owned enterprises caused the cash flow stream to rise in the past year by 50%. Over the long term, authorities will most likely continue to be supportive of overseas acquisitions to acquire advanced technology and strategic assets.

 

Keith Knutsson from Integrale Advisors commented, “with the volume Chinese investments have taken on the global scale, it remains important to consider the view the state takes for investments.”

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