Investment Boomin China

China’s economy grew 9.5 per cent in the second quarter from the same period a year earlier. This is the slowest pace in nearly two years which shows that the economy is “shifting from fast growth driven by policy to healthy development and Chinese growth is holding up well.” said Sheng Laiyun， spokesman for the National Bureau of Statistics.

According to the International Monetary Fund， China’s economy will grow by 9.6% in 2011， down from 10.3% in 2010. In fact， the IMF predicts China’s growth could account for more than 30 per cent of the world’s total economic growth. On average， the IMF expects the global economy to expand by 4.3% this year.

Analysts argue that China is at the investment “sweet spot” for developing markets which occurs when per capita income rises steadily but consumption increases rapidly， the retail sector develops and the service sector begins to take off. Moreover， China is taking measures to cut taxes and fund public housing.

U.K builds closer investment ties with China

The U.K. government recently published a trade and investment white paper to emphasize that it will particularly look at emerging economies like China. The United Kingdom is building closer investment links with China. In result， China-U.K announces business deals between the two countries valued at ￡1.4 billion (US$2.2 billion) and will increase bilateral trade to US$100 billion by 2015.

Meanwhile， China is a very important strategic partner for British companies.

The U.K. energy firm BG Group PLC reached a memorandum of understanding with Bank of China Ltd. for a US$1.5 billion credit line which will be used to support its global growth plans， including in China.

Beverage maker Diageo PLC was given approval to increase its holding in Chinese spirit company Sichuan Chengdu Quanxing Group. to 53%， a rare majority stake by a foreign firm in a Chinese company and a sign of increasing China’s openness. Diageo said steps are being taken to complete a 4% transfer for about 140 million yuan (US$22 million).

China agrees to foster opportunities for British companies to invest in infrastructure and other projects in China. In addition， China will streamline trade taxation between Britain and China.

Korea shifts reserves to China

As increasing concerns about the growing US government deficit and the weakening dollar， the Bank of Korea(BOK) is actively seeking to diversify its foreign exchange reserves.

The BOK plans to invest part of US$307bn foreign exchange reserves in renminbi-denominated assets on the Chinese mainland. The bank has applied for a quota under the qualified foreign institutional investor (QFII) program， which allows overseas groups to buy equities and bonds on the mainland.

So far， China has granted quotas about US$21bn to over 100 qualified foreign investors， including three central banks， namely Norway， Hong Kong and Malaysia.

Ten Korean institutional investors， including Mirae Asset， the country’s largest asset manager， have also won licenses to invest under the QFII scheme.

It is expected that the BOK will invest only US$200m to US$300m in Chinese securities if the license is awarded， given that quotas were limited in size. In despite of the small initial quota， the license will pave the way for greater investment in China in the future.

Invest in China’s food and drinks market

It now may be a good time to invest in China. “And China still has growth potential，” said Hugh Simon， manager of the Dreyfus Greater China fund.

China’s food and drinks sector has been targeted by many global companies in recent years. China’s confectionery market alone is worth more than US$9bn a year， according to Euromonitor.

In June， Diageo， the UK drinks group， announced a deal to acquire control of the Chinese liquor brand Shuijingfang， which is one of the first foreign takeovers in the food and beverage sector.

In July， Nestlé， the Swiss food group， was set to acquire Hsu Fu Chi， the Chinese sweets company， for S$2.1bn (US$1.7bn) in a deal that marks one of the largest foreign acquisitions in China and underscores the race for the country’s food sector.

With China offering the biggest market in the world for investment and Chinese consumers contributing as much to global consumer spending as their US counterparts， countries are recognizing that trade with China offers more opportunities than with either the US or Europe.