Last year, northbound capital inflow exceeded 430 billion yuan-foreign capital warmly embraced China assets.

　　Despite multiple unfavorable factors such as repeated epidemics, the inflow of foreign capital will remain strong in 2021. The data shows that in 2021, the northbound capital inflows for 12 consecutive months, with a cumulative net inflow of about 432.2 billion yuan, a record high for the annual net inflow. At the same time, the investment structure is more interesting, and the allocation of manufacturing industry has been greatly improved, indicating that foreign capital is highly concerned about and recognized the high-quality development of China’s real economy.

　　Experts said that with the continuous opening of China’s capital market and the sustained and steady recovery of macro-economy, in 2022, foreign capital will continue to actively embrace China’s assets and share China’s development achievements and opportunities.

　　Basically face up to attract foreign capital inflows.

　　Looking back at the beginning of 2021, overseas epidemics have been repeated, and the major international index companies have basically completed the inclusion of A shares, and the scale of passive capital increment has gradually decreased. The market is generally conservative about the scale of northbound capital inflows into A shares, but the statistical results since then show that the strength of northbound capital inflows is completely unexpected by the market.

　　Why did the northbound capital inflow hit a new high against the trend? Experts believe that this is mainly due to China’s stable economic performance, continuous improvement of policy environment and continuous improvement of market ecology.

　　"China has taken the lead in controlling the epidemic on a global scale, the economy has taken the lead in recovery, and its development resilience has continued to emerge, attracting foreign capital to continue to flow in." Tian Lihui, dean of the Institute of Financial Development of Nankai University, said. The latest data released by the National Bureau of Statistics also confirms this point. In November 2021, the national economy continued to recover, industrial and agricultural production rose steadily, the employment situation was generally stable, and high-quality development was steadily advanced.

　　Li Qiusuo, executive general manager of the research department of CICC, said that China’s economic growth is more stable than other markets under the impact of the epidemic, and China is still the main gathering place for global growth targets, and the valuations of leading companies are more attractive than those of internationally comparable companies.

　　On the other hand, overseas, affected by repeated epidemics and other factors, the economic and social problems in some countries are very serious. "In response to the impact of the epidemic, some countries have implemented large-scale quantitative easing policies, which have brought about a revaluation of asset values. International ‘ Smart money ’ Need to actively find a safe haven. " Tian Lihui said.

　　A series of new measures for two-way opening-up in China’s capital market, including lowering the entry threshold for foreign investment, promoting the facilitation and liberalization of cross-border investment, and enriching international financial products, have facilitated the northward capital investment. In addition, the RMB exchange rate has generally appreciated in the past year, and the low valuation of A shares has attracted international capital to enter China’s capital market.

　　"The capital market has been opened to the outside world at a high level in an orderly manner, the reform of the registration system has been steady, and the market ecology has continued to improve. Supported by multiple factors, the willingness of foreign capital to enter China’s capital market is constantly improving. " Li Zhan, chief economist of China Merchants Fund Research Department, said.

　　Optimistic about the development of manufacturing industry in China

　　Generally speaking, in 2021, the northbound capital showed the characteristics of increasing scale, actively increasing allocation and paying attention to manufacturing. "The proportion of actively allocated funds in northbound funds has increased." Li Zhan said that in 2019, three international indexes, MSCI, FTSE Russell and S&P Dow Jones, concentrated on including or expanding the inclusion factors of A shares. Under this background, the inflow of northbound funds in that year exceeded 350 billion yuan.

　　In 2021, international index companies have not further improved the inclusion factor of A shares. "This means that the foreign capital inflow of more than 400 billion yuan in 2021 is not the result of passive funds following the allocation of index machinery, but the allocation of A shares by active funds, indicating that the allocation value and attractiveness of China’s capital market are constantly improving." Li Zhan said.

　　Northbound capital has always been known as "smart money", and its allocation trend can not only show the judgment of foreign capital on the prospect of a certain industry, but also see through the changes of macroeconomic development. According to the data of CICC, the absolute position of foreign capital is still concentrated in consumer stocks, such as household appliances, leisure services and food and beverage industries. At the same time, the attention of northbound funds to China’s manufacturing industry is increasing. In 2021, more than half of the net purchases of northbound funds will flow to the midstream manufacturing industry. Among the net purchases of more than 400 billion yuan, more than 100 billion yuan flowed into the electrical equipment industry, and the chemical and electronic industries also received net purchases of 56.7 billion yuan and 47.2 billion yuan respectively.

　　"China’s manufacturing industry has an industrial chain ‘ Big, long and complete ’ And engineer bonus. In 2021, China’s manufacturing industry will still maintain rapid development in the face of various challenges, and its competitiveness will gradually be recognized, which will drive the allocation of foreign capital to China’s manufacturing industry to increase. " Li Qiusuo said.

　　Li Zhan believes that the changes in the northbound capital allocation industry show that the logic of foreign investment in China has quietly changed. In addition to the huge consumer market, China’s advanced manufacturing industry and high-end manufacturing industry are increasingly recognized internationally, and its strength and voice in emerging fields such as carbon neutrality are gradually improving. At the same time, the large inflow of funds from the north will also promote the further development of these industries, which will help promote the real economy to move towards high-quality development.

　　It is expected to maintain a strong inflow trend.

　　Looking forward to 2022, the market is generally optimistic about the inflow of northbound funds.

　　"Foreign capital will continue to embrace China assets." Li Zhan said that when the Central Economic Work Conference deployed the economic work in 2022, it proposed to continue to do the work of "six stabilities" and "six guarantees", continuously improve people’s livelihood, focus on stabilizing the macro-economic market, and keep the economy running in a reasonable range. With the strong support of macro policies, China’s economy is expected to continue its steady recovery in 2022, and the fundamentals of enterprises will continue to improve, which will further enhance its attractiveness to foreign investment.

　　The Research Department of CICC believes that the risk of overseas supply chain in 2022 may bring the pressure of RMB appreciation and promote the allocation of China assets by foreign investors. At the same time, China’s high economic growth, high manufacturing competitiveness and further opening of the capital market are expected to continue to attract foreign investment.

　　"Despite years of continuous inflow, the current shareholding ratio of foreign capital in A-shares is still low, China’s economic growth is still resilient, manufacturing advantages will remain for a long time, and northbound capital inflows will continue to expand." Tian Lihui said that at present, China’s capital market has grown into an important financial market in the world. The total market value of A-shares exceeds 90 trillion yuan, and the number of listed companies exceeds 4,000. The large economy contains strong capital acceptance capacity.

　　In order to further attract overseas investors to enter the China market and promote the A-share market to achieve greater development, in recent years, on the one hand, China has expanded its opening door, on the other hand, it has made great efforts to clear all kinds of obstacles to foreign investment. Not long ago, the CSRC publicly solicited opinions on the revision of the "Several Provisions on the Interconnection Mechanism of Stock Market Transactions between the Mainland and Hong Kong" and imposed strict supervision on so-called "fake foreign investment" in order to promote the market to be standardized and transparent and better facilitate real foreign investment.

　　More opening-up measures are in the pipeline. China Yi Huiman, Chairman of China Securities Regulatory Commission recently publicly stated that it is studying and launching relevant measures to further expand opening-up in accordance with the unified deployment of the country’s new round of high-level opening-up, including continuing to broaden the scope of Shanghai-Shenzhen-Hong Kong Stock Connect, expanding and optimizing the Shanghai-Shanghai Stock Connect system, expanding the international variety supply of commodities and financial futures, and promoting the establishment of a qualification certification mechanism for overseas employees.

　　"As China’s capital market continues to open to the outside world, the pace of northward capital entry will continue to accelerate in the future, and the participation of foreign capital in China’s capital market will become deeper and deeper." Tian Lihui suggested that while launching a series of new measures to open to the outside world as soon as possible, we should also pay attention to the relationship between overall planning and risk prevention. Relevant departments should strengthen research and judgment, improve the monitoring of cross-border capital flows, and prevent financial risks caused by large inflows and outflows of foreign capital.