China, the world’s second-largest economy is positioning itself as a more predictable, opportunity-rich alternative to the United States.
Following recent concerns that it wasn’t doing enough to kick-start its ailing economy, China has laid down a marker for the U.S.: When it comes to attracting foreign investment, it’s ‘game on’.
In direct response to potentially damaging U.S. economic policies, Beijing has announced plans to compete with the U.S. as the most compelling destination for global investment.
China’s economic recalibration is seen as a timely response to waning US investment appeal, heightened by trade wars, fiscal mismanagement and market volatility.
According to Nigel Green CEO of global financial advisory giant deVere Group, China is dusting off its tried and tested trade playbook that has succeeded in attracting foreign investors.
Green points to China’s launch of a sweeping special action plan to boost consumption as sufficient proof it’s not willing to take Trump’s plans to attract foreign investment lying down.
“Beijing is offering the clearest signal yet that it’s serious about revitalising domestic demand, stabilising financial markets, and reassuring foreign investors who have been wary of its shifting policies in recent years,” said Green.
“The contrast with the US could not be sharper. While Washington leans into economic unpredictability — protectionist trade rhetoric, deficit concerns, and policy zigzags — China’s presenting itself as a recalibrated, more investor-friendly alternative."
A second glance at China
Green suspects investors who had turned their backs on China will now be compelled to take a second look, especially in light of regulatory uncertainty in the U.S.
The fresh round of economic stimulus measures announced by the General Office of the Central Committee last Sunday include a multi-pronged approach focused on strengthening consumer confidence, reducing household financial burdens, and creating a more stable investment environment.
For starters, China plans to curb the steepest decline in its consumer price index in over a year by “enhancing consumption capacity by increasing income and reducing burdens.”
Secondly, to restore investor confidence Beijing is implementing “multiple measures” to stabilise the equity market.
Plans are to develop more bond products tailored to individual investors, expanding wealth-building opportunities and financial market depth.
Markets like what they see
Early signals suggest markets like China's actions. The CSI 300 and Hong Kong’s Hang Seng Index both registered gains of 0.1% on Monday, which Green attributes to nascent green shoots of renewed optimism.
Asian markets have clearly taken some solace from recent reassurances by China’s Premier Li Qiang that boosting consumption is the government’s primary economic goal for the year ahead.
The Chinese premier knows all too well that addressing deflationary pressures - that saw the producer price index contract in October 2022 - is tributary to restoring consumer and international investor confidence and gaining ground in global financial markets.
For retail and institutional investors who pulled capital from China during regulatory crackdowns and economic uncertainty, Green suspects China’s recent initiatives may trigger a reassessment.
“The promise of stability, pro-growth policies, and targeted stimulus may outweigh lingering concerns about policy shifts,” he noted.
“The US has traditionally been a haven for global capital, but confidence is eroding due to Trump’s aggressive tariff escalations and erratic policymaking.”
Momentum shift
Whether China’s latest round of economic measures translate into a full-scale revival of foreign investment remains to be seen. However, Green believes the momentum is shifting.
Early signals suggest China's consumer spending growth has picked up pace.
According to National Bureau of Statistics data released on Monday, retail sales rose 4% in the January-February period, better than a 3.7% cent rise in December.
However, China’s industrial output slowed in January-February, while fixed investment was undermined by continued weakness in the property sector.
In the meantime, Chinese leaders have maintained their economic growth target of “around 5% ” for 2025.
“Retail sales growth was decent, reflecting the vital role of subsidies in supporting home appliance and mobile phone sales,” Tianchen Xu, senior economist at the Economist Intelligence Unit, told Reuters.
Measures to expand domestic demand include a 300 billion yuan ($65.3 billion) trade-in scheme for electric vehicles, appliances and other goods, plus income support and childcare measures.
China’s economic plan also calls for raising urban and rural incomes, plus measures to boost farmers’ earnings through housing reforms.
There is no specific timeline or methodology to be proposed for the stabilisation of the stock market in Sunday's plan.
