China remains attractive to investors

Yuan internationalization to further facilitate flow of capital

China remains attractive to European investors as they are suffering from sluggish growth at home, and the internationalization of the yuan will further facilitate investment, industry insiders said at the China-EU Business Forum of the International Capital Conference 2014 in Beijing on Monday.

The Chinese auto market is bigger compared with the US and Europe and the country is a land of opportunities for PSA Peugeot Citroen, said Gregoire Olivier, CEO of China and South-East Asia of Europe's second-largest carmaker by sales.

PSA's 50-50 joint venture with Dongfeng Motor Group, China's second-largest automaker by revenue, has expanded its market share in China to 4.5 percent from 3 percent over the past five years, Olivier said.

Also, amid a surging wave of Chinese firms going global in recent years, Dongfeng agreed in February to make an investment of 800 million euros ($1.02 billion) for a 14 percent stake in the French carmaker.

For airlines, "it is absolutely necessary to be present in the Chinese market," Henri Hie, Air France's vice president of Development and Partnerships in China, said at the forum.

The number of tourists and passengers in the Chinese market is growing 15 to 20 percent annually compared with 3-5 percent increase a year in the European market, he said.

The remarks came after some concerns that China is losing appeal to foreign investors, as the country's economy slows down, domestic companies heighten competition and the country gradually phases out some super-national preferential treatment to foreign-invested enterprises.

China attracted foreign direct investment of $87.36 billion in the first nine months of this year, down 1.4 percent from a year ago, official data showed on Thursday.

"China still needs foreign investment despite abundant foreign exchange reserves, and its largest attraction to the European investors is the [huge] market with consumption capabilities," said Long Yongtu, former vice minister of commerce.

China's fledgling pension and wealth management market offer opportunities for European financial firms, said Sandy Begbie, chief operation officer of UK's Standard Life.

The wider use of the yuan in the global market will facilitate trade and investment. About 44 percent of the payments made between France and China via Hong Kong are made in the yuan, compared with zero four years ago, said Laurent Fouquet, vice president and COO of Credit Agricole CIB.

China (Shanghai) Pilot Free Trade Zone (FTZ), which currently serves as a testing ground for the convertibility of the yuan under the capital account, will boost the globalization of the currency if offshore yuan can be further freed to float nationwide rather than confined to the zone, said Jane Jiang, a partner of Allen & Overy, an international law firm.

Currently offshore yuan loans of the FTZ-based firms can only be used within the zone or overseas, which limits the wider use of the currency.

China plans to accelerate the process of making the yuan convertible on the capital account and will allow foreign investors to use it to invest in Chinese financial institutions, said Hu Xiaolian, deputy governor of the central bank, who was quoted in a statement published on the central bank's website on Monday.