eChinaJOBs APP Download

The Money Game: Popular Investments Trends in China in 2014

Feb 09, 2015 By Benji Yang , eChinacities.com Comments (5)     Add your comment Newsletter

  • Facebook
  • Twitter
  • WeChat
  • Email
  • More sharing

In a country where red means positive return (gain) and green means negative return (loss), finding the right investment where risk and reward are balanced can be, at times, difficult. Here’s how some of China’s wealthiest individuals invested their money in 2014.

    - Internet related technology investments

    - “Shadow banking”

    - Alternative investments such as art, wine, watches and jewelry

The above three proved to be popular investment choices in China in 2014, it’s also possible that they’ll be good trends into 2015, though not all are built on solid fundamental value.

Investments in China
Photo: Attila Mexico

1) Alternative Investments
Alternative investments like art, wine, watches and jewelry surprisingly ranked third in popularity after real estate and stocks (equities), the global financial crisis driving much of this interest. The Hurun Institute describes this trend of investing in alternative assets a result of Chinese individuals looking beyond wealth creation and investing more based on passion. See the chart below for a breakdown of the popularity of the various types of alternative investments.

Investments in China

It would seem that of the alternative investments, watches and jewelry have the brightest prospects going forward, and art and alcoholic spirits seem to be in somewhat of a decline. One of the reasons investing in art may be waning may have to do with the recent popping of the art investment trend in 2011, where billions of dollars of wealth was lost.

Despite the fact that investment interest in alcoholic spirits is declining, it has been one of the largest areas of growth in recent years, so much that formal exchanges for rare spirits and wines have even been setup.

The reason why watches and jewelry are becoming more popular have to do with their high resale value and the low cost of collecting. Growth for these industries are ripe as Chinese individuals seek to diversify away from diamonds and into other precious stones and metals.

What’s the bottom line? Be wary of bubbles in the alternative assets space, and invest in what you know.

2) Shadow Banking
What has been happening recently in China is non-bank intermediaries have been raising money from individuals, then go on to invest in whatever they deem to provide the highest returns while paying these individuals a nominal annualized interest rate that is higher than what they could’ve gotten at a bank or financial institution.

Perhaps the two best examples of shadow banking are Alibaba’s “Yuebao” and high yield “Licai” (理财) products sold in brokerage houses. In Alibaba’s Yuebao, users can transfer their savings to get an interest rate that’s higher than what banks pay individuals to deposit money into savings accounts. High yield “Licai” products are fairly ubiquitous and while investors can get yields in excess of 8%, the funds are basically black boxes.

This is a particularly hot topic because the shadow banking sector as a whole is unregulated and now big enough ($4.39 Trillion US Dollars) to pose a systemic risk should there be widespread defaults. Because it is not regulated by any of China’s financial regulatory bodies, where the money comes from and what it invests in is also largely a mystery. Because the shadow banking sector has swollen to such a massive size, China’s central government has taken an interest in regulating the shadow banking sector and reducing the systemic risk it poses to China’s economy.

The bottom line: There can be good gains to be had, but regulation is a major risk, as the government can deem your particular shadow investment to be illegal and shut it down.

3) Internet Related Technology Investments
From early stage angel or seed funded companies to newly listed public companies, internet based technology companies have seen their valuations soar in recent years. Some notable pre-IPO companies that received funding in 2014 are:

    - Dididache, a taxi-hailing app raised $700 million USD

    - Meituan, a groupon-like internet firm raised $700 million USD

    - Xiaomi, a manufacturer of mobile phones raised $1.1Billion USD with a valuation of $45 Billion USD

    - Dazhong Dianping is also rumored to have raised $800 million USD in round E funding with plans to go public soon.

Two Chinese internet technology companies that went public in 2014 are:

    - Alibaba goes public in the largest technology IPO ever - $21 Billion USD

    - JD.com also goes public in 2014, raising $1.78 Billion USD

The general consensus is that at the moment, Chinese internet based technology companies are a little too hot at the moment and in a bubble, particularly those which have yet to go public, and that the companies that have gone public currently trade at high valuations already, making them less attractive as an investment vehicle.

Bottom line: It feels kind of like the dot-com boom, but MUCH bigger and in China. Some tech companies will be able to deliver real long-term gains to investors, but pick your companies carefully.

For the latest China related news and stories sent right to your phone follow our WeChat account:

SinoBytes

Warning:

The use of any news and articles published on eChinacities.com without written permission from eChinacities.com constitutes copyright infringement, and legal action can be taken.

Keywords: Investments in China 2014 popular investment choices in China

You might also be interested in

  • All the Single Ladies! Why Does China’s “Leftover Women” Phenomenon Exist?

    China’s notorious “leftover women” are the lucky ladies who’ve reached the age of 27, but have not yet married. Why are these ladies being set apart? Why don’t men want them? In a land with a male dominated gender imbalance, how can this be happening?

  • Top 7 Financial Tips for Expats in China

    Being away from your homeland has its advantages, but it also most certainly has disadvantages. As a financial advisor, one of the biggest problems I see with foreigners living in China lays in the realm of finance. This isn’t necessarily due to not making enough money. Rather, the big problem ...

  • What’s in a Name? Foreigners in China with a Chinese Name

    Our names are the stamps of our identity, especially for the Chinese. So why is it that many Chinese themselves – especially those who immigrate – find the need to re-name themselves? Here, one British writer of Chinese descent recounts her experiences of living in China with a Chinese name.

  • Things Travellers Don’t Know About China, but Should

    For many people, China is a land of mystery. So many years behind the Bamboo Curtain gave it an air of the unknown, and even thirty years after the re-opening, it still holds a certain allure to intrepid travellers. Whether you're coming here as a visitor, or settling here as an expat, there are ...

  • Biting the Bullet: Going to the Dentist in China

    Going to the dentist in China is possible, and this is the complete expat’s guide to surviving that first foreign dentist visit, whether you want to get a professional clean, or definitely feel a cavity coming on.

  • Communication Chaos: 5 Ways to Keep from Losing Your Mind in China

    China is a very exciting country to be in for various reasons. For most foreigners, you’ve come for business, work or travel. Even though you've got so many tasks on your list, there remains one thing you can’t afford to botch: communication.

5 Comments ( Add your comment )

1
comment|55608|255695
Guest2301262

Antiques, watches, paintings.....etc. speculation --- evergreen, where is the bigger fool 'game'. IPOs "- Alibaba goes public in the largest technology IPO ever - $21 Billion USD" With the anti-corruption shows in China, ever wonder what are the fastest ways to launder colossal amount of corruption money?.... LOL

Feb 09, 2015 18:32
2
comment|55610|81937
bill8899

I don't think the watches in the picture are investment grade? :\

Feb 09, 2015 20:05
3
comment|55632|263116
Guest2368048

Huge cultural differences. Ask around, see how many mainland chinese view money as a game.

Feb 10, 2015 13:40
4
comment|56198|1578794
Guest14209148

Buying Alibaba, JD and Xiaomi is a no-brainer for making money.

Feb 27, 2015 13:47
5
comment|57891|43131
Guest388182

red means gain? so, bleeding is good? green means loss? so, money is bad?

Apr 02, 2015 09:18

Add your comment

All comments are subject to moderation by eChinacities.com staff. Because we wish to encourage healthy and productive dialogue we ask that all comments remain polite, free of profanity or name calling, and relevant to the original post and subsequent discussion. Comments will not be deleted because of the viewpoints they express, only if the mode of expression itself is inappropriate. Please use the Classifieds to advertise your business and unrelated posts made merely to advertise a company or service will be deleted.

Please login to add a comment. Click here to login immediately.

Do you know more about this topic?

Share your experience with other readers and earn points and rewards.

How can I earn points? Post Blog

Share your blog with others and earn 5 points.

Most Read in eChinacities

This week This month

Living in China

Featured Comments

Hot Jobs Hot Classifieds