Costs, risks rise as protectionism grows: experts
Increasing investment barriers and uncertainties resulting from a growing global trend of trade protectionism are causing serious problems for cross-border investment, with potential risks and costs on the rise, experts said over the weekend.
A scarcity of good investment opportunities is one of the major problems that companies across the globe face, Tu Guangshao, general manager of the country's sovereign wealth fund China Investment Corp (CIC), told an economic forum in Beijing on Saturday.
Many companies have ample capital but few good asset choices, Tu said, noting that "high asset prices have also deterred some investment."
He added, "as the global market is seeing rising protectionism, entry into some sectors is quite difficult."
Tu said there is a strong focus across the world on employing cross-border investment as well as mergers and acquisitions to promote economic growth.
"Investing in foreign markets is also one of China's vital strategies to drive its economy, and making good use of foreign direct investment (FDI) and outbound direct investment (ODI) plays a key role in the country's economic transformation and upgrading," Tu said.
From January to October, China's FDI grew 4.2 percent year-on-year to 666.3 billion yuan ($97 billion), and the country's ODI in non-financial sectors jumped 53.3 percent on a yearly basis to 146 billion yuan, according to data released by the Ministry of Commerce on November 17.
The Financial Times on Tuesday reported that China is to clamp down on outbound foreign investment to curb capital outflows that are placing downward pressure on the yuan and draining foreign exchange reserves.
Vice Finance Minister Zhu Guangyao responded that the country's reform policies including the internationalization of the yuan will firmly advance, and Chinese authorities are closely paying attention to market changes and capital flows, said a report by chinanews.com on Saturday.
Although the yuan has declined against the U.S. dollar, it has still gained against a basket of currencies, Zhu was quoted as saying in the report. "Or more directly speaking, the yuan has risen against other currencies except the U.S. dollar. If the U.S. dollar is the strongest, the yuan is the second to the strongest," Zhu noted.
Experts said that China is making efforts to encourage domestic companies to directly invest in foreign countries and regions, but outbound financial transactions like investments in stocks, securities and property markets will be strictly regulated by the government as speculation and capital flight could easily happen in these industries.
Domestic companies are expected to focus on the improvement of their investment ability in a bid to create a virtuous circle between industrial upgrading and the allocation of cross-border capital, said Tu.
Liu Weidong, an expert from the Chinese Academy of Sciences, said at the same forum that China is stepping up efforts to promote the "One Belt, One Road" initiative, aiming to set up a platform for the flows of global capital.
China is committed to going global and will promote more inclusive and profound regional economic cooperation under the initiative, he said.
