Question

China is a major element of strategic planning for managers and investors. 1. What are the pro's and con's impacting the foreign investor pursuing the Chinese market?

Answer 1

Foreign investors are generally free to choose their mode of entry into the Chinese market through anyone among the following options. Foreign investors can take any option of entry mode in accordance to their business requirements as well as venture feasibility.

Pros :

China will be an attractive income investing destination going forward, driven by increasing demand for yield within the region and a more stabilised economy, according to Mike Kerley, fund manager of the Henderson Far East Income trust (HFEL).good thing about China is that it is very difficult for local investors to invest outside of the local market, which constrains their investment destination, boosting demand further,”

dynamics are emerging in China as per Kerley's view, who believes that there will be decline in an interest rate in the country. This will drive investors to look at different yielding opportunities, and rising demand for income will drive dividend yields up.

Con's

Difficulty in reaching the end users directly

Dependency on the middleman

Limited knowledge of consumers’ needs

Still subject to tariffs/quotas

Issues in the provision of Post sale service

Local market entry restricted and only possible through local and direct channels in China.

China has continued to rely on government stimulus, and creating more debt to meet its economic growth targets. Since the global financial crisis in 2008, total debt of China has quadrupled to 250% of GDP, according to NN Investment Partners. Credit to the corporate sector is the main driver of China’s rising debt and this level is well above the level of its emerging market peers and exceeding even developed economies.