News - 22.11.2023

Replay – China Finance Forum

  • China

After decades of uninterrupted growth that made this country of 1.4 billion people look like a future El Dorado for international financial investors, the world’s second largest economy has stalled in recent years. The draconian health restrictions of the zero covid policy isolated it from the rest of the world for many months. Months during which investors have also seen the vast property sector falter dangerously, weighing on the country’s overall economic performance. Not to mention the geopolitical tensions with the United States and the issues surrounding Taiwan, which are all sources of concern. The eighth edition of our China Finance Forum, on 21 November, therefore came at just the right time to take stock of the health of the Chinese financial sector in a troubled international context, and to decode investors‘ new ambitions.

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In an initial overview of the Chinese economy, Jörg Wuttke, Advisory Board Member of the Mercator Institute for China Studies, pointed out that China still holds 60% of the world’s production capacity and produces 31% of european consumer goods. „With the exception of around thirty categories of products, notably in the health sector, I don’t consider that Europe is overexposed to China. It is above all China that needs outlets in Europe“, he reassures us, pointing out that Chinese domestic consumption has fallen in recent years.

In terms of financial activity, he notes a major outflow of capital, linked both to the rise in interest rates in other parts of the world and to the overcapacity of Chinese production facilities. This impression was shared by the experts on the first panel of the day, which took stock of international investors‘ interest in China. „Frederick Neumann, Chief Asia Economist and co-head of Global Research Asia, HSBC, said: „Even if current growth rates are lower, at around 5% this year, there are still plenty of investment opportunities. Catherine Yeung, Investment Director, Fidelity International, notes that „international investors are currently less interested in China because of declining valuation levels, but the situation should improve in 2024“. Both agree that they see great opportunities in the tech (AI), healthcare and consumer services sectors.

Chinese institutional investors are also showing increasing interest in investing outside their borders. In a second panel, three representatives of the international business of major domestic Chinese financial institutions tried to identify their preferred targets. Today, they are particularly looking for investments that offer a relatively high return – a return better than the GDP growth rate – and safety. In terms of listed assets, they are particularly interested in the technology sector, especially US Big Tech. In fact, the US market is their main focus abroad, although they also admit to an interest in Japan, India and Europe.

Senior Vice President Ant Group, Leiming Chen, gave a very enlightening account of Big Tech in China, of which his group is the main standard-bearer. „We are known for payment services within our group, but less so for our international activities in this area. For example, today we assist a very large number of SMEs that are more exposed to risk and volatility to do business anywhere.“

 Dr King Lun Au, Executive Director, Financial Services Development, then spoke about the major developments in the Greater Bay Area, at the heart of China’s economic and financial development, with Hong Kong at its financial heart. „Hong Kong is transforming itself into an international financial city. It is the world’s leading centre for UHNWIs and is now trying to attract family offices from all over the world.“

Lastly, in a discussion with Julie Becker, CEO of the Luxembourg Stock Exchange, Dr Jung Ma, Founder & President of the Institute of Finance and Sustainability, welcomed the work carried out jointly with the European Union over the past two years to establish a „Common Ground Taxonomy“ for green bonds. „Everything to do with investments in the fight against climate change must be harmonised as widely as possible in order to facilitate cross-boarder investment flows“. He added that Singapore and other – unspecified – countries would soon be joining this initiative.

Watch the full replay here.