Chinese Economy Slowing...Creating Opertunities

According to numerous Chinese financial experts, the Chinese economy will face greater uncertainty in 2016. The prospects of global economy recovery are still unclear. If the US Federal Reserve raises interest rates continuously, it will cause emerging economies to suffer capital outflow and local currency depreciation. China is under pressure of de-capacity and industrial deflation, and whether real estate investment will stabilize remains uncertain. Among these factors, the stabilization of the Chinese economy will depend more on global economic recovery, the Fed rate hike and domestic real estate investment, as excess capacity cannot be reduced in the short term. Economists forecasts that the economy will grow at 6.7 percent this year with further downward pressure in the first six months. But the economy will stabilize after the second quarter, as the government will strengthen the current fiscal and monetary policies and the previous policies will take effect gradually. More than likely, Chinese government will continue to depreciate the RMB to possibly 7.5/1 (compared to USD) to stimulate the manufacturing industry and exports. This will mean a devaluing of Chinese assets. This is the perfect time to invest and prepare for a rebound in 2017.

Tighter Regulations for Payment Platforms in China

Starting July 1, 2016, China will tighten regulations on non-banking online payment platforms to to fight against financial fraud and money laundering. Now you have to open accounts with real names and identifications. China has also imposed a cap on maximum yearly payments through such platforms at 200,000 yuan ($30,910). According to the new policy, for example, each account on WeChat can transfer at most 1,000 yuan through the "Lucky Money" function. If more money needs to be transferred, the users must provide three to five ways to verify identity, including bank accounts, driving license and social security ID.

China Promoting PPP Structure

To support public-private partnership (PPP) projects China will provide a 180 billion yuan rewards pilot program that will start in 2016. The private partners in the PPP projects will be offered three-tier rewards based on the investment scale. For a PPP project with investment of under 300 million yuan ($46.3 million) the central government will provide 3 million yuan in reward; for a project between 300 million yuan and 1 billion yuan, the reward will be 5 million yuan; and for a project above 1 billion, the reward is 8 million yuan. It also encourage uncompleted locally-funded public service projects to transform into PPP model projects. For those successfully transformed projects, the central government will also provide rewards. The reward scale will be 2 percent of the debt reduction the transformation brought to the local government. This move will help ease the local government debt problem in China, while at the same time stimulating the Chinese economy to reach a goal of 7% GDP growth in 2016. This is also a great opportunity for investors looking to invest with the local government (a less risky investment in China).