Question

II. Discussion. (60') 1. (30') In the context of the surplus capital of the developed countries, the international investment fund is especially aimed at the Asian market dominated by China and India. In recent years, various forms of diplomatic investment funds have been pouring into China. In various financial forums held in Beijing and Shanghai, representatives from overseas investment funds can be seen everywhere, trying to share this emerging market achievement in China. It is roughly estimated that the number of foreign funds invested in China has exceeded $300 billion, while the number of funds at the project inspection stage is at least $700 billion. What is the impact of the international investment fund on China's capital market?

Answer 1

The decision to opening up China's financial market for foreign direct investments, boosts the accessibility and diverse investment options for foreign investors. The pouring of foreign investment to chinese economy helped the capital market to performing its best and the Chinese bonds considered as the most safest investment option . As the economy have enough funds for investment purpose , China channelled more money to the real economy , so that it will attain and boost a high growth level.Lower borrowing cost, tax cuts ,high infrastructure spending, etc improve the corporate earnings level also. Credit creation and credit growth level increased and share market performance shows a five fold stock market growth .A diversified portfolio for Chinese bonds with significant yield premiums ( with lower average durations ) is the another impact of foreign investment funds.  Investor confidence levels increased on Chinese debt contain management and China is taking a leadership position in capital markets through its green finance and green bonds. This foreign investment pouring also leads to a high innovative technology led solutions and advanced technological implementation provides a high quality low cost service for its investors.