(Bloomberg) — For all the talk of an economic decoupling between China and the U.S. and its allies, foreign companies continue to pour money into the Asian nation.
The coronavirus pandemic and trade tensions have highlighted the risks of over-reliance on China, prompting several countries to consider diversifying supply chains, with a potential knock-on effect on investment.
Yet the latest official data from China shows that hasn’t happened. New foreign investment is on track to set another record in 2020, hitting 94% of last year’s total by the end of November, according to Commerce Ministry data released this week.
Not only is that helping to drive the economic rebound, but with China reducing barriers to investment and the economy the only major one likely to grow this year, investment is set to continue flowing into the country.
“U.S. and other foreign firms will continue to invest in China as it remains one of the most resilient economies during the global pandemic and as future growth potential there remains stronger than most other major economies,” said Adam Lysenko, an analyst at Rhodium Group who researches Chinese investment.
The investment boom comes despite continued political uncertainty for foreign firms. The Trump administration has ratcheted up tensions in recent months, placing restrictions on Chinese businesses, especially in the technology sector. China’s policy toward the incoming Biden administration is still unclear. And an investment treaty between the European Union and China hasn’t yet been signed, although it’s getting close.
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China is making a bigger effort to boost foreign investment. The government this week published a shortened list of sectors in which market access is restricted, and also said some international businesses would be able to tap financial support.
Despite the outbreak of the pandemic and the unprecedented economic contraction in the first quarter, almost 19,000 new foreign firms were set up in the first seven months of the year, officials said in August.
The automobile industry is one that’s seen increased activity. China was already the world’s biggest car market before the coronavirus, and although sales are expected to fall for a third year this year, global companies are looking to Chinese demand to boost their fortunes.
In the financial sector, companies such as UBS AG, Daiwa Securities Group and Goldman Sachs Group have either taken control of their joint ventures in China, or are looking to do so as the industry is further opened up.
At the same time, a record $214 billion in foreign funds have poured into higher-yielding Chinese bonds and stocks this year. The currency is likely to continue to appreciate next year on those flows, even as the U.S. sanctions Chinese firms, works to stop pension funds investing in Chinese companies, and passes legislation that could stop them listing on U.S. stock exchanges.
Staying Put
Recent business surveys show many European and American companies are staying put in China, despite increasing calls from various politicians to diversify their operations or return home. More than three quarters of the 200-plus U.S. manufacturers in and around Shanghai said they didn’t intend to move production out of China, according to a September survey.
The governments of Japan, South Korea and Taiwan have implemented policies to help reduce their economies’ reliance on Chinese supply chains and production, but with mixed results so far.
Taiwan has a long-term plan to attract capital back home from China, though companies continue to boost their investment into the mainland as well.
In Japan, the government began paying companies this year to invest at home or in Southeast Asia, though there’s little sign that the subsidies have caused any firms to pull out of China so far.
“China doesn’t have to be worried or dissatisfied,” Japan’s new ambassador in Beijing, Hideo Tarumi, told Phoenix TV last month. “We’re not asking Japanese companies to withdraw from China, but to diversify risks.”
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
