China- the World’s favourite Piggy Bank

In the backdrop of a ‘supposedly’ slowing economy, there is some good news coming China’s way. This Asian superpower is apparently the World’s most favourite economy to invest in- attracting an astounding 10% of the global private equity investment. As compared to the encouraging figures of USD 1 Billion in 2000, the investment in China has incremented to about USD 15 Billion as of the last analysis- a powerful 10% of the global investment pie.

According to a study conducted by the influential Roland Berger Strategy Consultants, the express reason for this mammoth hike in foreign investment is the very positive attitude maintained by the Chinese government with regards to the private equity investment- seeing these funds as fresh lifeblood to the country’s thriving SME segment. This investment accounts for funded businesses contributing upto 60% to China’s gross GDP, businesses that employ 80% of the Chinese workforce and accounts for 70% of the country’s gross exports.

However, the question on every financial analyst’s mind is this- will this positive trend last? Currently, the Chinese government is hell bent on restructuring its economy by rebuilding it from the ground up. Severe restrictions have been placed on new IPOs since last year and an estimated 900 companies are still waiting for their permissions to go public. Ground situations such as these have forced Roland Berger to forecast an immediate future for the Chinese market wherein the free input of foreign funds and a somewhat restricted IPO segment leads to the consolidation of the current situation.

The current situation however, is just what the doctor ordered for China. Now, the Chinese Government should utilise this golden opportunity by encouraging the foreign investors to pick their investment targets carefully, with an onus on the Industrial sectors and exports that are working towards the Chinese progression. A healthy regard for the present and a strategically sound approach towards the future is the crying need of the hour.