Is 2021 a good year for foreign investment in China?
An important component of some investors’ strategies is expanding investment opportunities into foreign markets. However, for many investors, there is a large question mark looming over foreign investing. The domestic market alone is difficult enough to navigate and predict. Trying to do the same in a foreign market can be doubly daunting. Still, many investors choose to include foreign investing in their strategy because of the opportunities it presents.
As we continue to move through 2021, the markets around the world are shifting and growing. If you are considering expanding your portfolio to include foreign opportunities, you might be wondering if this is a good year to start investing in Chinese assets.
Is foreign investment in China a good idea?
In March 2021, the Holding Foreign Companies Accountable Act passed by the Trump administration was adopted into law by the U.S. Securities and Exchange Commission (SEC).
The objective of this bill requires certain companies specified by the SEC to submit documents to establish they are not owned or controlled by a foreign government entity. This means that Chinese companies must declare each board member who is a member of the Chinese Communist Party. Companies that do possess a Communist Party board member may be subject to delisting from the market.
So, why does this matter to the investor? Well, if you are considering investing in Chinese businesses, you need to have confidence that a particular company is not vulnerable to delisting due to political reasons. When a company is delisted from the major U.S. markets, you can only trade its shares through a process known as “over-the-counter” (OTC). The problem with this is that OTC trading is challenging. It is hard to find buyers without taking a loss.
Ultimately, it is up to you whether foreign investment in China is worth it. There may be great opportunity for short- or long-term growth in a Chinese business. However, the risk of delisting and the challenge of navigating a foreign market may mean you might want to consider avoiding it for now.
Talk to a ProVise CFP® professional about foreign investing in China
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about foreign investing in China? Contact ProVise today to schedule a complimentary consultation.