Global investors welcome to board China’s fast train of development

Note: The following is an edited translation of a commentary from the Chinese-language "Commentaries on International Affairs."

China’s government recently released data on the country’s economic activity in July. The data  showed that the value of imports and exports reached 377.5 billion U.S. dollars, a year-on-year increase of 12.5 percent and 8.2 percent up from June. Exports were 202.3 billion U.S. dollars, up 3 percent on last month, and imports were 175.9 billion U.S. dollars, up 14.9 percent. With imports and exports offsetting each other, the trade surplus was 25.7 billion U.S. dollars, narrowing by 12.2 billion U.S. dollars from the previous month.

Trucks transport containers to be shipped abroad on a quay at the Port of Qingdao in Qingdao City, Shandong Province, on April 13, 2018. [Photo: IC]

China's import and export growth, and the narrowing of the trade surplus, indicates that China's measures to further open up its economy are paying dividends. As China's President Xi Jinping said at the World Economic Forum last year, China's development is an opportunity for the world. China’s approach to development is not a narrow-minded one – people from around the world are welcome to ride on the fast train of China’s development. This spirit of openness will be given a further boost in the second half of the year with the launch of the Shanghai-London Stock Connect initiative, and the first China International Import Expo, which will be held in Shanghai.

The Shanghai-London Stock Connect initiative will see the connection of the Shanghai and London stock exchanges. The Shanghai-London Stock Connect is the first step in joining the world's largest emerging market with its oldest and most mature market. Making China’s securities markets more international will improve opportunities for British companies to participate in China’s capital market, and international investors will have more convenient access through Shanghai-London Stock Connect to financing opportunities.

The move to link the Shanghai and London exchanges follows on from the introduction of Shenzhen-Hong Kong Stock Connect in 2014, and Shanghai-Hong Kong Stock Connect in 2016. These two earlier initiatives have already been shown to enhance the capacity for financing and securities lending between Hong Kong and mainland enterprises. In addition to these measures, China’s first open-end futures product, crude oil futures, have been listed on the Shanghai Futures Exchange, and A-shares have been partially included in the MSCI Emerging Markets Index. Foreign investors are now allowed to retain 51 percent of the shares in joint venture securities and investment fund companies, and they have been given greater access to A-shares. 

The result of these reforms has been that China has attracted more and more inbound foreign capital. China's State Administration of Foreign Exchange reported that cross-border capital inflows into securities in the first half of the year is double what it was over the same period last year. And according to the China Securities Regulatory Commission, from January to July, 23.4 billion U.S. dollars in foreign capital flowed into the A-share market. Even with the escalation of global trade frictions in June and July, 7.2 billion U.S. dollars flowed into the A-share market.

In the capital market, confidence is more important than gold. The influx of foreign capital shows that global investors are confident about China’s prospects for continued economic development. Once the Shanghai-London Stock Connect is opened later this year, there is little doubt that investors will move to take advantage of the opportunities that it brings. 

The second major initiative that will give a boost to global traders this year will be the first China International Import Expo, which will be held in Shanghai in November. More than 2,800 companies from over 130 countries have registered to participate so far, and 150,000 buyers are expected to attend. More than 30 foreign companies have already signed up to take part in the event next year. Why is there so much interest in the expo? It’s because many companies can already see that the desire of Chinese consumers for a higher quality of life is energizing the global market for consumer goods. 

From 2017 to 2022, China will import an estimated 8 trillion U.S. dollars' worth of goods, and absorb 600 billion U.S. dollars of foreign investment. Chinese tourists will take 700 million trips overseas. At a time when protectionist roadblocks are appearing along some of the traditional routes of global trade and investment, China is providing global companies with a welcome boost of confidence. That confidence was expressed in the “American Businesses in China White Paper” released by the American Chamber of Commerce in China in May, which showed that 46 percent of respondents believe that China’s government will further open the country’s markets to foreign investors over the next three years, a substantial increase on the 34 percent who held this view last year. And nearly 60 percent of the companies surveyed listed China as one of their top three investment destinations, with one-third of them planning to expand investment in China by 10 percent.

China has a huge market of nearly 1.4 billion people, and the world’s largest middle class. But more than that, its government is determined to support trade liberalization and to facilitate foreign investment. The world’s investors and commodity traders would be hard pressed to find a bigger market with more opportunities than what is on offer in China. The country is continuing on its fast track to development, and it welcomes people from around the world to come along for the ride.