WFOE China Asset Management

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Introduction

Did you know what is WFOE china asset management? Many foreign investors choose to set up WFOEs (wholly foreign-owned enterprises) in China.

Then, the asset management of a WFOE is WFOE china asset management.

Good management of the asset for a company can help it make more money and lose less.

Today we are going to discuss why WFOE China asset management worth our attention. And the current situation of the market of WFOE China asset management.

Find the list of WFOEs in China.

WFOE China asset management #1: Great value for long-term investment

China’s assets have long-term investment value, and foreign investors are optimistic about the development prospects of RMB financial assets.

On July 25, the international monetary forum 2020 opened online. And the theme was “the construction of global financial centre under the new development pattern”.

Xiao Gang, former chairman of China Securities Regulatory Commission, delivered a keynote speech at the meeting.

He said that if we want to build a good allocation centre of RMB global financial assets:

First, the government should speed up the reform of financial market elements and adhere to the direction of marketization, legalization and internationalization. Besides, the government should abolish unnecessary administrative control and let the market play a decisive role in the allocation of resources.

Second, we should actively promote the internationalization of RMB. We will continue to expand the use of RMB in overseas project financing and cross-border loan trade payment.

Third, we should promote the reform of the RMB exchange rate and the convertibility of capital account in an orderly manner. Also, need to improve the RMB exchange rate formation mechanism.

Fourth, we should strengthen the construction of regulatory capacity to prevent input-oriented risks.

The spread of the global epidemic in the first half of this year has caused a large fluctuation in the global financial market. Stock, bond, gold, exchange rate, futures, crude oil and other major asset prices fluctuated. In particular, the U.S. stock market broke four times in March. This triggered a circuit breaker in 11 other countries.

Despite the turmoil in the international financial markets. Compared with the international market, China’s financial market shows relatively stable operation situation and strong toughness.

All in all, China’s stock market has achieved relatively rapid growth.

In particular, the number of IPOs in Shanghai and Shenzhen should exceed that of NASDAQ and NYSE.

The bond markets

From the perspective of the bond market, China’s national debt market has developed rapidly, and corporate credit bond has also developed rapidly. Also, in the first half of the year, China issued more corporate credit bonds.

From the perspective of the RMB exchange rate, the supply and demand of foreign exchange market have maintained a basic balance. Moreover, foreign exchange reserves have also increased, and the RMB exchange rate is more flexible. And the exchange rate has maintained a two-way fluctuation and is stable on the whole.

wfoe china asset management

WFOE China asset management #2: Benefits witnessed by the numbers

Statistics show by the end of 2019, the financial assets of CNY/RMB allocated by foreign institutions have reached 6.4 trillion. And the annual growth rate is 20%.

This is not a small number.

In terms of the stock market, as of July 10, 2020, the net foreign purchase of shares has exceeded 170 billion CNY/RMB. However, this is only from the Shanghai and Shenzhen Hong Kong stock connect channels.

By the end of June 2020, the balance of China’s A-share shares held by foreign investors has reached 368.4 billion US dollars. And this is 13% higher than in 2019.

The balance of Chinese bonds held by foreign investors also reached 369.1 billion US dollars. This is 10% higher than the previous year, and the bond holdings are three times that of foreign investors in 2016.

By the end of June this year, the number of bonds entrusted by overseas institutions had reached 2.19 trillion CNY/RMB. It was 82.9 billion CNY/RMB more than that at the end of May, up 33% year on year. However, this is the month on month data for May and June.

In addition to foreign direct investment, RMB has also achieved good results. In the first half of this year, China’s utilization of foreign capital reached 472.2 billion CNY/RMB. Especially in the two quarter, China’s utilization of foreign capital increased by 8.4%. From a global perspective, direct investment is also shrinking. It is not easy for us to achieve an 8.4% increase in foreign investment in the second quarter.

Well, all of these shows that foreign investors are very interested in the Chinese market. China is becoming more and more attractive.

Know more about WFOEs here.

WFOE China asset management #3: Why foreign investment shows great interest in RMB?

The global attractiveness of financial assets has increased significantly. The reason is that China’s financial market shows a relatively stable situation and strong resilience. At the same time, China’s financial market also has a strong vitality.

Specifically, it is reflected in the following aspects:

Chinese capital is the main force to stabilize the global economy

China’s economy grew by 3.2% in the second quarter, according to the recently released first-half data.

The industrial added value and the profits of Industrial Enterprises above the designated size have turned from negative to positive.

Among them, the PMI of manufacturing industry has been stable above the boom and bust line for 4 consecutive months. And the production index of the service sector has also shifted from growth to growth.

Although the overall investment growth has declined. But the decline continued to narrow, and consumption accelerated.

Therefore, this fully reflects the inherent resilience and vitality of China’s economy. In other words, the development of China’s economy has enhanced the confidence and momentum of global economic recovery.

Because of this, foreign investors have greater confidence in CNY/RMB asset.

However, such a stable economic environment is particularly conducive to attracting long-term capital inflows.

The valuation of China’s A-shares in the world’s major stock markets is still relatively low

As of June 30, the price-earnings ratio of the CSI 300 index was 12.69 times. It is 26.7 times lower than the standard 500 index, 23.33 times of Germany’s (BX) index and 26.19 times of Nikkei 225 index. Therefore, compared with these major stock indexes, A-share should be said to be a better profit allocation of assets.

With the spread between the CNY/RMB and the US dollar widening, the real yield on 10-year Treasury bonds has now fallen below zero. However, China’s 10-year bond yield is still around 3%. Therefore, for investors who hold us dollar liquidity, CNY/RMB assets are of course highly attractive.

In terms of investment in fixed income products, although China has continuously lowered interest rates in response to the impact of the epidemic. But China’s interest rate level is still more appropriate.

From the perspective of China’s long-term supply and demand balance, there is neither inflationary pressure nor deflation concern.

Then, maintaining the current low-interest rate is very conducive to investment in fixed income products.

Compared with listed companies in Europe and the USA

At present, many listed companies in Europe and the United States are suffering from the impact of the epidemic, and their profits are also decreasing. So their companies have suspended share buybacks. In the past decade, many listed companies in Europe and the United States have used a lot of cash to buy back shares.

This is good for stock prices, investment and returns. However, after the outbreak of the epidemic, many listed companies in Europe and the United States stopped buying back shares.

Some listed companies even stopped paying dividends. This puts a lot of pressure on overseas fund returns.

In addition, after the epidemic, central banks in Europe and the United States implemented quantitative easing without a bottom line. This policy generally implements a zero interest rate and negative interest rate, which greatly reduces the yield of financial assets.

In this context, the security, profitability and robustness of CNY/RMB assets are highlighted.

China’s capital market has become one of the largest markets in the world

China’s stock market and bond market totalled 160 trillion CNY/RMB, the second largest in the world.

Also, our mutual fund market is the fifth largest in the world. If we add public funds, trust funds and asset management products, these three parts will add up. We are probably third in the global fund market.

Therefore, such a large capacity of the market has a higher degree of activity and greater resilience. Once included in the international index, foreign long-term funds will follow the allocation.

At present, China’s stocks and bonds are included in several major international indexes. Therefore, it has also attracted more long-term funds to allocate CNY/RMB assets.

The opening policies for financial market take obvious effects

In 2020, the Chinese government announced a series of financial opening-up policies and measures.

For example, China has cancelled the investment quota of QF and MQF. And cancelled the restrictions on the proportion of foreign shares held by financial institutions, and so on.

These policies have greatly improved the convenience of foreign investors to participate in China’s financial market asset allocation.

Conclusion

In this article, we discuss some aspects of Chinese asset management of WFOE, which are as follows:

  • The investment value of Chinese asset management of WFOE in China is huge in the long run,
  • Digital witness benefits in Chinese asset management of WFOE,
  • Four reasons why foreign investment shows great interest in RMB.

If you find this article useful, don’t forget to share people with more people. And keep up with the latest articles. You will learn more about Chinese asset management of WFOE.

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