China's accession into the World Trade Organization (WTO) will bring huge economic benefits in the long run, but the capital market won't see the sort of drastic rise in global demand for Chinese shares as it did a decade ago.
The remark was made by John A. Prasetio, Asia Pacific Managing Partner of Andersen, a well-known accounting agency based in the United States, during a recent forum in Tianjin.
According to Prasetio, overseas investors, including people of Chinese origin and others from Asian countries, as well as world institutional investors based in North America, Europe and Japan have shown an interest in China's stock market.
However, the Asian financial crisis has made investors more conservative toward newly emerging stock markets, Prasetio said.
In the meantime, factors such as the share plunge on the US NASDAQ and the global economic recession have made it necessary for investors to take action to ward off possible financial risks, said Prasetio.
He stressed that western investors are no longer interested in making investments in those countries where there are ambiguous and poorly enforced laws and regulations to protect property, a lack of market transparency, and an information release system that needs improvement.
He believed that once Chinese enterprises gain higher credibility in the eyes of overseas investors, the anticipated growing investment demand in the US will become an important source for China to raise money for the world market to develop its economy.
A report from the World Bank shows that the inflow of overseas investment funds into China's stock market came to US$7.8 billion last year, compared with US$42 billion worth of foreign direct investment into the country in the same year.
However, during the same period, the amount of foreign capital flowing into bourses of the United States totaled US$173 billion.
Prasetio said that the statistics have demonstrated the possibility that the Chinese market is capable of offering more investment schemes, and China will have the potential to attract more investment once the country's laws, regulations, and market operations are adapted into sophisticated global capital market.
( November 1, 2001 )
