How much do foreign investors contribute to China's growth?

CGTN Europe interviewed Rory Green, Chief China Economist for TS Lombard

Transcript

00:00Rory Green is the Chief China Economist for Independent Investment Research Provider,

00:04TS Lombard. Good to see you, Rory. Welcome back to the program. So, will this plan to

00:10increase foreign investment in China work, do you think?

00:14I think it's a good start. And along with the improvement we're expecting to see in

00:20the macroeconomic environment, which is, of course, a massive factor for prospective investors

00:25in China, we are expecting an increase in the domestic demand side of GDP this year,

00:31which is really critical to pull in foreign investors. I think those two combined, and

00:36we will see a better environment for FDI into China over the next couple of years, certainly

00:42compared to the last few.

00:44So what challenges do you think investors might still face despite this plan being brought

00:50in?

00:51Yeah, as I mentioned, the growth factor has been a big challenge in the last couple of

00:58years, and the returns on cash as well. So big hurdle is growth relative to the pre-COVID

01:05economy, the domestic market has been relatively sluggish, it's been exports powering growth.

01:12And this year, we'll see improvement on that side with investment and consumption picking

01:16up, helping to pull in investment. So that will be critical. And the other factor when

01:21looking at FDI is what companies can do with the money they make in China. And when interest

01:27rates are high, the RMB strong, that money stays within the PRC. Over the last couple

01:33of years, the dollar has been exceptionally strong, and rates outside of China have been

01:38very high, certainly relative to the PRC, and that's pulled money out. And that's still

01:44the case with a bit of a hurdle on that front for China to overcome. But at least on the

01:49growth side, we're looking at a much better environment.

01:51Well, one new factor, if you like, US tariffs, of course, what role might they have to play

01:59in foreign investments in China?

02:02Not just for China, but for everyone. It's a huge source of uncertainty at the moment.

02:09And until there is clarity on how high the US tariffs may go, or whether a deal could

02:15occur with China, it is going to delay new export orientated investment into China, and

02:24many other economies as well. But of course, China, under real scrutiny, for investment

02:30that is targeted to make in China for the China market, tariffs shouldn't have much

02:36of an impact. But the export side is really where we're looking for some damage there.

02:42So the overall number's down, but we did see some countries increasing investment into

02:47China, the UK among them. Why was that?

02:52I think for the UK, we are highly compatible with China's current stage of development.

02:58We are excelling in service exports, finance, law, architecture, whereas China is predominantly

03:07a manufacturing powerhouse. So very compatible economies, relatively few areas of direct

03:14competition. So the avenues for UK investment into China remain pretty strong at this stage.

03:23Rory, good to talk to you. Thank you so much for coming on the programme. That's Rory Green,

03:28Chief China Economist for Independent Investment Research, provider TS Lombard.