Although we believe China will continue to raise its investments globally, recent events forebode a slowdown in overseas investment sprees, at least temporarily.
Outward direct investments in 2017 dropped substantially to $US120bn (minus 29.4 per cent).
Some Chinese conglomerates are beginning to dispose of their interests in offshore development projects and commercial real estates, according to news reports.
Domestically, the environment is not supportive of safer investments. Deleveraging is pushing down government bond prices. Local property markets have also tightened. Investors seem to have no choice other than to buy equities or wealth management products.
At the top of China’s policy agenda in 2018 is risk management. Despite an improved exchange rate outlook, the policy bias will still favour capital inflows.
Currently the only official channel to alleviate the pressure of China’s savings glut seems to be Hong Kong equities denominated in $HK.
But the market is virtually dominated by Chinese companies. It is not a meaningful way to resolve the global imbalances highlighted by Mr Bernanke.
Restrictions on foreign buyers are a reaction to the savings glut
China’s buying of foreign properties could be seen as circulating its accumulated trade surplus to the developed world.
The resulting price increases have prompted many governments to impose restrictions on foreign buying and carry out assessments of the impact on local construction and citizens’ affordability.