China Begins to Open Their Doors to Western Investors

Recently, China has been in the news a great deal, Beijing seems to be opening more and more doors, to the free world and is more accepting of the open markets. The Chinese economy is very dependent on the west, or western style nations. China needs consumers, to keep their billions of citizens at work and to be able to export their goods.

Recently, China has been facing an economic slowdown caused by the global recession and compounded by problems in the EU. As western consumers cut spending, the need for Chinese exports drops.

Just about every major financial news source today is running at least one story on the Chinese economy, varying from the drop in real estate values, to changes instituted by the Peoples Bank of China, to currency trading on to a drop in Chinese exports and trade balances.

The Yuan, an unheard of closely traders closed currency, is not part of the international forex markets, soon there might be open trading between the yuan and all currencies. Just last week, China and Japan, agreed to allow direct payments between the two currencies without the conversion to US Dollars. China also repurchased billions of dollars worth of currency in an agreement with Singapore and Taiwan.

It was just reported, that China’s trade surplus grew in December, surpassing forecasts as exports remained resilient while imports weakened, although full-year figures pointed to an overall narrowing trend for the Chinese trade gap.

Last month’s trade surplus grew to $16.52 billion, the General Administration of Customs announced today, with the result beating market expectations of $7.8 billion.

The figures showed December’s exports climbed 13.4% from a year earlier, following a 13.8% rise in November, and thrashing expectations of a 12.5% rise according to economic surveys.

Imports were up 11.8% for the month, but still below a forecast 18% rise and cooling from November’s 22.1% rise. For the full year, the trade surplus totaled $155.14 billion, representing a drop of 14.5% from 2010 levels.

The euro zone remained China’s top trading partner, with circular shipments valued at $567.21 billion in 2011, a rise of 18.3% from 2010 levels. Trade with the U.S. totaled $446.65 billion, a rise of 15.9% from year-earlier levels. Japan is China’s third largest trading partner; Chinese trade grew at the fastest pace with Southeast Asia, where shipments for the year totaled $362.85 billion, a gain of 23.9% for the year.

China will open its capital markets further to foreign investors and seek a greater role for long-term institutional investors in a bid to boost the country’s lagging stock exchange. China needs to substantially boost the scale of direct financing, such as stocks, to diversify systemic risk in the banking sector. This is the latest indication of Beijing’s willingness to lift the mood of investors in a depressed stock market–historically times economic and social instability.

China more and more realizes that they have to open channels to reap the benefits of economic growth and stability not just internally but also externally, China needs to join the global markets and not just sit on the sidelines and benefit.

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