Foreign investment into China set to top $1.5 tn over 10 years

Mar 25, 2019
Linklaters projection more than triple level of previous decade

Things are looking up for the Chinese market, with an impressive $1.5 tn of investment into China expected over the next 10 years, as a new foreign investment law starts taking effect, according to research from law firm Linklaters.

The analysis projects $1.5 tn of inbound investment into China over the next decade, accelerated by the newly signed Foreign Investment Law, which increases the scope for foreign investors’ Chinese M&A and investment strategies. The Linklaters projection is more than triple the level of the previous 10 years.

The level of inbound M&A – which hit a record $56 bn in 2018 – is projected to grow still further when the law, signed on March 15, takes effect on January 1, 2020. It replaces three older laws that govern foreign invested bodies and foreign investments in China. It promises equal treatment and intellectual property protection for foreign invested entities.

William Liu, managing partner for Linklaters in China, says in a statement: ‘The increasing liberalization of foreign investment into China will be a key component for the development of the Chinese economy to move up the value chain, to meet the needs of its growing middle class, and to boost exports. In 2018, the shortened ‘negative list’ [cutting restrictions for foreign investment] sent a strong message to international market participants, catalyzing investment into key sectors such as automotive and financial services.

‘The newly signed Foreign Investment Law will only help to accelerate this process as international investors and companies develop their Chinese deal-making experience.’

The equity markets in Hong Kong and China have already seen a significant boost on the news that the markets face another step in the liberalization process.

Investors are awaiting the introduction of a bidding process that will allow technology start-ups to raise capital in Shanghai: the Shanghai Stock Exchange, which was ordered by Chinese President Xi Jinping in November to open a new board for technology start-ups, will now accept submissions for IPOs.

This positive outlook is also reinforced by the high level of CEOs in China who are more optimistic about global growth in the next 12 months than their global counterparts, according to PwC’s 22nd Annual Global CEO Survey China Report.

Altogether, 73 percent of CEOs in mainland China believe global economic growth will improve, compared with 41 percent of CEOs in Hong Kong and 42 percent globally. This is the only economy among the major territories surveyed that is more optimistic this year than last.

CEOs in China are confident of revenue growth despite the global economic slowdown. More than one third (35 percent) of mainland Chinese business leaders feel ‘very confident’ in their company’s prospects for revenue growth over the next 12 months, while a higher proportion (47 percent) are confident about their company’s growth prospects over the next three years.

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