How China's Investment in UK Companies Affects The Stock Market
Companies / UK Stock Market Oct 23, 2013 - 11:36 AM GMTBy: Submissions
Brett Chatz writes: Earlier this year Chinese fashion brand Bosideng opened a flagship store in London. According to the China Daily, in an interview with Zhou Xiaoming of the Chinese Embassy in the UK, the products sold are made in the UK; even if it's an exaggeration it's still quite a u-turn!
Of course, when you think about it, China has been manufacturing a good proportion of our consumption for several decades now, and for the rest of the western world. Inevitably they are now a very wealthy nation and anxious to invest some of that money where there are good returns to be made, rather than just injecting it into their own economy and creating additional inflation.
The UK, a country that recognises that it needs some major infrastructure projects to accelerate recovery, knows that it also needs access to the capital necessary to fund those projects. China, on the other hand, has a wallet stuffed with some $430 billion and is constantly looking for somewhere to spend it. Add to that the fact that the UK is one of the easiest, most welcoming and least regulated countries for foreign investors, and it’s no surprise to learn that China now owns a significant amount of the UK, one way or another.
So how does the stock market react to the growing capitalist influence of communist China? Well, basically the capital markets need capital and there has never been too much worry at the Stock Exchange where it comes from. The UK has always been one of the most open of economies, with the fewest trade barriers of the advanced nations, whether in legislation or in attitude. We seem to understand that with increased cross border economic activity, everyone’s a winner.
Although the Stock Market does have a reputation for short-termism, it has actually been in existence long enough to know that ‘what goes around, comes around’, with the balance of trade, stock and property ownership flowing back and forth when viewed over the longer term.
The recent news about opening our capital markets to Chinese banks, reducing the visa bureaucracy for Chinese visitors to the UK are all signs that the UK government sees China as a major business partner. An experienced spread betting company will be looking carefully at where the Chinese are looking, to see the share price rise if there is investment. Equally, if the Chinese walk away without doing a deal, that could be a very good time to bet on a fall.
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Article by Brett Chatts
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