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China ‘More Investible Than Ever’ for Middle East and Latin America, but Western Capital Remains Wary

China is more investible than ever for businesses from the Middle East and Latin America, but it would not regain its appeal for Western investors any time soon amid its increasingly opaque business environment, a prominent research firm said.

“There’s a lot of negativity around [the fact that] China’s uninvestible, which I think reflects that most of our media remains very Western centric and for the rest of the world, China is not uninvestible,” Louis-Vincent Gave, founding partner and CEO at Gavekal, told a seminar in Beijing on Thursday.

“If you’re a US pension fund today, or if you have US public money, then China is not investible, that’s just plain simple, and I don’t think that changes any time soon.

“Against that, if you’re a pension fund in Latin America, or a public or a private institution in the Middle East, China is actually more investible than ever now.”

‘Door to China-US relations will not be closed again’: Xi Jinping offers assurances to US businesses

Pension funds are growing rapidly in developing countries, and Chinese bonds have been more stable than US treasuries, while countries in the Middle East and Central Asia are increasingly reluctant to invest in the United States due to repercussions for Western sanctions against Russia following the invasion of Ukraine last year.

The comments come as confidence among the foreign business community has been eroded by China’s increasingly tightened and volatile regulatory environment, while a lack of transparency and China’s weak economic recovery has driven away foreign capital.

According to the Ministry of Commerce, despite the rise in the number of newly established foreign-invested enterprises in the first 10 months of the year, yuan-denominated actual foreign capital used dropped by 9.4 per cent, year on year, to 987.01 billion yuan (US$138 billion).

Direct investment liabilities – which measures both inflows of foreign direct investment and outflows of capital from investors – stood at a deficit of US$11.8 billion in the third quarter, according to preliminary balance of payments data released by the State Administration of Foreign Exchange, marking the first quarterly deficit since 1998.

Chinese leaders have attempted to charm and reassure concerned Western investors, who have ramped up de-risking efforts, and Beijing has released guidelines pledging more market access, speedier cross-border data flows and easier visa access.

But analysts and foreign chambers have said more concrete measures must be implemented to reverse sentiment.

For Western investors, the three years of China’s zero-Covid policy and closed borders meant the business environment has become more opaque and the decision making process clouded by a lack of high-level visits and first-person knowledge, Gave added.

He also said that unpredictable crackdowns against the real estate, education and big tech sectors have spooked foreign investors.

“If, for whatever reason, it’s in the government’s crosshair, then it goes from 100 to zero as we saw in the education stocks, very quickly,” he added.

Western investors’ worries over tensions in the Taiwan Strait have also been noticeable, especially among European businesses, he added.

Source : SCMP