Who is investing in china

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Receive free Asia-Pacific equities updates. The writer is chief global investment strategist at Charles Schwab For many investors, recent regulatory actions by China have been unnerving. We have a moderate exposure to China and our mandate is really to find the best companies, the best investment ideas globally. Kai Zhang: Thank you. Good mandate. In the meantime, well, we tend to take a very opportunistic stance on how to actively allocate our risk exposure.

Now, we're focusing very much on the Chinese because we think it's a very attractive sector. Now, in terms of what specific securities we have, one such name on top of your mind is Tencent. Analogical wise, it's the big brother of Sea Limited but it's in China. For people who are not familiar with Tencent, Tencent really the company can be broken into two parts. One is on the social media. There you have the WeChat and the QQ, another instant messaging platform.

Those two platforms, especially WeChat, they became ubiquitous in China and they became the foundation of a lot of the technology platforms in China. We can order food on it, you can submit your COVID test results, or a vaccination record on there, whatnot. Then on the other side, Tencent also has a sizable gaming operations. They provide a lot of the mobile games and that's been very profitable.

The reason why we like Tencent is because we think it's a company that's very disciplined, exhibit a very good ESG track record and willingness to comply, and then also the valuation is very attractive.

Jason Moser: One more question before I let you go, because you mentioned gaming and this is something that's just come up recently, but I know that it's something that's caught a few eyes.

Do you have any concerns with the notion that the Chinese government wants to limit the amount of time that kids can play video games over the course of a week? I mean, it seems like that would be very difficult to implement so I'm not sure exactly how they do that, but I don't know. I mean, how do you feel? To me, it just feels like it would be a very difficult thing to implement.

As a matter of fact, I think it makes me more bullish because they realize how powerful it is. But I also understand the perspective of there's this notion that they could be addicting and that could be problematic for younger children as they grow up into adulthood.

Do you have a perspective there on that effort on trying to limit the amount of time spent playing games? Kai Zhang: Yes. The short answer to your question, Jason, is that I'm not particularly concerned about this limitation on kids at given time. That's teenager user name. Of course, the real number maybe it's kids taking parents identification and then do the gaming online, that's probably a bit bigger. Kai Zhang: I want to say that it's much bigger.

The proportion of the teenagers as a proportion of the total gamers on Tencent platforms, that's relatively small. I'm not saying that Tencent is not impacted, it is impacted somehow. But then I think if you look at the grand picture, it's adults that spend the most both time and money on those games.

Kai Zhang: To be honest, I think the Chinese government clearly indicated that they are not only now on to penalize those gaming companies. Actually, they want to enhance the status of the Chinese gaming companies because they see that as an important tool to increase China's soft power. It's just another format of media that is very addictive. They want to limit the kids, not the adults.

Excellent question, Jason, about how to implement this regulation. Three hours per week per child, that's very difficult. How do you do that? But that I think with technology, I think the gaming companies will come up ways to more closely execute the government's mandate.

For example, Tencent, they are [unclear]. Maybe they can develop some technologies to verify the gamers by their facial features to see if either that's a minor or that's an adult. I think with technology, the magic of that is they can enable a lot of the previous impossibilities into possible. That's why we love technology at Esoterica. Thank you so much for taking the time to join us this week on Industry Focus.

I look forward to talking again with you very soon. Jason Moser: That'll do it for us this week, folks. You can learn more about Esoterica Capital by visiting their website at Esotericacap. You can follow Kai on Twitter, KaiEsoterica.

Remember, you can always reach out to us on Twitter MFIndustryFocus or drop us an email at industryfocus fool. Thanks as always to Tim Sparks for putting the show together for us. I'm Jason Moser. Thanks for listening, and we'll see you next week.

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Obligation to Declare The China International Investment Promotion Agency facilitates the distribution of information on necessary authorisations for establishing a business in the country.

All proposed foreign investment projects in China must be submitted for 'verification' and approval to the National Development and Reform Commission NDRC or to provincial or local Development and Reform Commissions depending on the sector and value of the investment. Chinese State-Owned Enterprises are often the targets of foreign investors. Although, it is important to note that additional rules apply to the purchase of State-Owned Enterprises by foreign investors in China.

Greenfield investment projects must also seek approval from China's Environmental Protection Ministry and its Ministry of Land Resources.

The Possibility of Buying Land and Industrial and Commercial Buildings Foreigners are allowed to buy their property only after having worked or studied in China for at least one year. They are only entitled to own one property in China and it must only be used for residential purposes.

Commercial or industrial property can only be purchased after a company has been incorporated in China. Risk of Expropriation The risk of expropriation is high. Article 20 of the Foreign Investment Law of the People's Republic of China stipulates that the government shall not expropriate investments made by foreign investors. Only in special circumstances national security and obstacles to large civil engineering projects , the State may expropriate or requisition an investment made by foreign investors for public interest in accordance with the law.

Such expropriation or requisition shall be carried out in accordance with the procedures of law and fair and reasonable compensation shall be given in a timely manner. Investment Aid Forms of Aid Foreign investors enjoy corporate tax reductions, exemptions of tax on dividends repatriated during a certain period and other tax advantages.

Investment Opportunities The Key Sectors of the National Economy Manufacturing sector, automobile industry, information and communication technology, aeronautics, energy including nuclear energy , services, finance, building, tourism, health, agriculture, mining extraction, health, online sales largest world market , transport infrastructure High Potential Sectors Chemical industry, insurance and bank, high technology, renewable energy, environment, waste treatment, franchises, medical devices.

Privatization Programmes China, whose economy is mixed, has a high number of state-owned corporations. Many of these firms suffer from disadvantages such as over-indebtedness and low efficiency, among others. The Chinese state wants to open these firms to private capital. Partial privatisation of numerous Chinese state-owned enterprises has been discussed since , without having led to deep changes in the Chinese economic landscape.

Under the government of President Xi Jinping, the mixed-ownership reform, which injects private capital into state-owned enterprises, is being promoted. He is leading a campaign against private entrepreneurs and companies that he previously courted in his early years in power.

Now he wants them to serve the party, and harness their technologies for its political ends. Hardly surprisingly, the campaign has triggered a precipitous fall in the stock market valuations of tech, digital and other companies. For example, the shares of Didi, the ride-hailing app listed in New York in June, are down more than 40 per cent since its initial public offering.

As well as investors holding individual Chinese stocks, these include many retail savers who have put money into China funds, Asia funds and many tech and growth-orientated funds.

We need to decide whether investing more cash in China right now, or even retaining the holdings we bought in the past, is a good idea. I have no definitive answers but the prospects do not look good. Since I first went to China in there have been times when, like elsewhere, Chinese assets were both absurdly dear and ridiculously cheap, and subject to normal risk assessment. Yet I cannot remember a time when the issue about investing was dominated by unpredictable politics and governance as it is now.

After such a hefty decline in key stock prices, including in well-known companies such as Alibaba, Tencent and Didi, investors are often tempted to buy, hoping for a bounceback. Yet, siren voices can be heard, warning about elevated risk surrounding many Chinese stocks. Billionaire investor George Soros, for example, recently said that investors buying into any rally in China were in for a rude awakening.

It is an important moment to ask what is going on, and how that should shape the way we think about investing in China. Investors have been fed for years with a marketing pitch about the virtues of investing in China. These arguments have weight. In the current turmoil they seem, for now at least, to have helped broadly based onshore markets, such as Shanghai, hold up better than the tech- and digital-heavy offshore markets in Hong Kong and New York.

The latter feature many more companies affected by the new regulatory blitz and political risk. The investment kaleidoscope, however, is in flux. But far from rising, that typical allocation has dropped recently to 4 per cent. I suspect that, in the entire debate for and against higher allocations, they will stay low relative to expectations because of weak governance and unpredictability.