Chinese investors look to overseas opportunities

SHANGHAI - China, the world's top manufacturer and investment destination, is becoming an important global investor as more Chinese companies look for investment opportunities abroad.

Kyle Liu, founder of Canada-based technology company Inano Medical Inc., is working hard to attract investment from China for the company's research and development office located in Ottawa.

The investment comes from ZDG Ottawa International Incubation Center, a business incubator jointly founded by Invest Ottawa and Zhongguancun Development Group, a state-owned enterprise in China.

The center was opened in December 2012 with startup capital of about 55 million yuan (9.09 million U.S. dollars). Inano is among the first four high-tech companies to settle into the center.

Sophie Chen, manager of the center, said they are looking for ground-breaking innovation technology programs in Canada that can meet the needs of the Chinese market.

In the past few years, a growing amount of Chinese capital has sought investment opportunities in the world market in the form of venture capital (VC) and private equity (PE).

Analysts believe the trend is partially the result of the appreciation of the Chinese currency.

Unlike the depreciating currencies of other emerging economies, the value of the Chinese yuan grew 3 percent against the U.S. dollar last year, three times the growth of the previous year.

"The rapid appreciation of the Chinese currency has forced domestic capital to flow overseas, and at the same time offered a larger profit space for outbound investments," said Li Jisheng, president of Shanghai Yuankai Investment Management Company.

In September 2012, China's regulators introduced a more than year-long freeze of approvals for new listings in a bid to stamp out equity market fraud and restore faith in the domestic market.

Initial Public Offerings (IPOs) did not resume until the beginning of this year. However, the standards for new listings are still very strict, and the exit channels for VC and PE in China are not smooth, said Li.

China's equity investment market has failed to provide enough opportunities for the money, which has encouraged local investors to look abroad, said Xiong Xiaoge, vice president of the U.S. venture capital firm IDG.

Before the establishment of the Ottawa Incubation Center, Zhongguancun Development Group had already launched an incubation center in Silicon Valley. The company is also ready to expand its business to other countries, including Finland and Israel.

Chinese personal assets have also entered the global market through QDII (Qualified Domestic Institutional Investor). Statistics show that QDII funds exceeded 76 billion yuan (12.56 billion U.S. dollars) at the end of 2013.

Against the background of a weakening stock market and the Shanghai Composite Index falling 6.75 percent in 2013, the QDII funds have reaped returns of more than 4 percent, which has diversified the investment risks for domestic capital.

CITIC Capital, a leading alternative investment management and advisory company in China, announced the establishment of a new hedge fund platform, CCtrack Solutions, last week.

CEO of CITIC Zhang Yichen said that with China's growth in outbound investments, the need to hedge against foreign currencies and the diversification of asset allocation will increase on a large scale, and the fund will provide effective strategies for Chinese investors' liquid investments overseas.