One may assume that the United States dislikes China, especially during a campaign year. But the Chinese love America. Especially real estate, and the S&P 500.
According to China’s State Administration of Foreign Exchange (SAFE), U.S. fund managers raked in a record breaking $116.7 billion from Chinese portfolio investments in both stocks and fixed income in the first half of last year alone. That number most likely doubled by the end of the year, as China’s stock market tanked, the renmimbi was allowed to weaken in August, and wealthy Chinese looked for new outlets for capital preservation.
All told, China’s outbound portfolio investments were $268.8 billion in the first half of 2015, with the U.S. accounting for nearly half. No other single country came close to attracting Chinese capital.
Hong Kong was the second destination of choice, attracting $49.5 billion, followed by third place tax haven Cayman Islands with $16.3 billion. A little more than half of the outflows went into stock purchases.
More money is coming.
Beijing wants to make the renmimbi a global currency by 2020, and further loosen the management over foreign exchange to facilitate cross-border capital movement for individuals and companies, Central Banker Zhou Xiaochua wrote in an op-ed in the People’s Daily in late November. Making the yuan a global currency alongside the dollar and the euro has been a key goal for the government, and removing capital controls is necessary to achieve that. As the renmimbi goes global, there will be more China wealth flying around the world whether the local economy is booming or not.