Published On: Fri, Mar 6th, 2020

Top tips for investing in China effectively

If there is one country on the planet which has seen awesome growth in recent times it is China. Home to over one billion people, it has seen a major transformation in its economy during the last few years to make it a real powerhouse on the world stage. It now sits as the second biggest global economy behind the USA, which shows just how impressive this growth has been. Indeed, many industry experts are pegging China to become the world’s premier economy by GDP when 2030 rolls around! 

photo/ Etereuti

This strong growth and positive future outlook have led many investors from outside China to become interested in putting their money into the country. If investing in China is something you or your business is thinking of doing, what are the best tips to make it a success? 

Get some help from within China itself

Investing into any new territory is always a challenge. This is certainly true if you plan to put money into launching your own product in China. A great tip if this does apply to your business is finding partnership or investment help from with the country itself. The pharmaceutical industry is a good example of a market in China that is expanding its reach across the globe and many US drug companies are looking to partner with China clinical research companies that offer exciting business opportunities.

Putting in this kind of investment research can allow you to see if there are any Chinese companies willing to work with you and help you see a return on the money invested into any new product or service launch there. Whether it is to out-license totally or seek funding from within the country, researching your options in advance in this area is a good move.

Pick what you invest in carefully 

If you instead plan to invest money directly into Chinese companies or American ones trading there, it is essential to choose where you put your money carefully. While there are some strong Chinese companies to invest in directly on the country’s stock exchange or American ones who do business in the country, many foreign investors opt to trade via an ETF fund. 

These funds give you the chance to invest in a variety of companies in China that are all bundled up into one basket. Not only does this help spread your market exposure compared to investing in individual shares, but it can be a more convenient way to access the Chinese financial markets for US investors.

Follow the same basic guidelines you would normally 

Although investing in a new county such as China is a little different from the norm, how you go about it as an investor should essentially be the same. The big thing here is to conduct due diligence before putting money into any fund or asset class. Just as you would for US companies, make sure to investigate the company’s accounts, revenue growth and the competitive edge any company you may invest in has. 

Of course, if you are planning to invest in other areas like real estate in China, then you should also perform the necessary due diligence before risking any money. The key thing to remember is that you need to be sure any investment is a good choice so you can be confident of seeing a return on it. This is the same whether you invest in China, America or London!

Be prepared for some cultural differences

As you would expect when choosing to invest abroad, there will be some cultural and regulatory differences when it comes to Chinese assets. This is not a bad thing but merely something that you need to accept as a foreign investor. Chinese listed companies on the Hong Kong or Shanghai Stock Exchange for example are regulated under the country’s own CAS accounting laws, not the GAAP laws found within America.

Naturally, if you work with a Chinese-based broker to invest in the country, the time difference between the countries means that they may not always be on hand when you are or get back to you instantly. You must also remember that how people interact is different in China, and bear this in mind when speaking to investors or brokers there. If you have all this in mind when investing in China, it will make it all much easier. 

China is a wise investment choice

The sheer amount of people in China coupled with the rosy outlook for its economic future all make it a tempting proposition for investors. Whether this is in terms of investing money to launch your business there or investing on an individual basis in the Chinese financial markets, there are many opportunities to be taken advantage of it would seem.

Author: VJ


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