More Investors from the United Kingdom Are Putting Money into China

There are recent numbers coming in that show that more and more British investors are putting money into China’s growing economy. With new data coming in about 2010, it has been revealed by the BBC and other major media outlets that the foreign currency pot in China has grown by large amounts. In addition, the entire loan situation in China surpassed the expectations and even the official plans of the Chinese government.

The headline comes out of the United Kingdom, where falling economic activity has moved investors into more active markets. The central bank of China could not remain within its own limits for lending due to this strong demand for business activity in the region. Banks in China issued over £0.77 trillion worth of loans in its local currency in 2010. This was quite a bit more than the government has hoped would be lent out. The reasons for capping lending are all related to controlling inflation. If loans are given out freely, the value of money decreases, because it is so readily available.

The overall money supply in China increased by almost 20pc in 2010 which was also more than official plans which were to increase the money supply by just 17%. The increase in foreign currency reserves was the biggest change in the whole policy shift. The increase, in terms of dollars, was calculated at $199 billion. This means that China’s existing collection of foreign currency reserves is over $2.85 trillion, the largest in the world.

In the UK, many investors in manufacturing and assembly moved the majority of their investment money to China in a move that helped boost the overall amount of currency to its record level. However, all of this comes at a time of increasing inflation in the Chinese market. In November 2010, this rate hit 5.1%, the highest in two years. In response, the central bank in China increased interest rates for the second time in three short months.

For those who issue loans out of China, the amount that is required for lenders to keep in reserve was also increased. Those Chinese banks that issued loans in December 2010 found that the amount of total funds loaned hit over 480 billion Yuan, which is the Chinese currency. An economist at Shanghai Securities, Hu Yuexiao, regularly makes visits to the UK to talk to potential corporate investors about current events in the Chinese economy. He stated that the data from the central bank has shown that there was much growth in the money supply and credit sectors. This would indicate that the tightening of credit by regulators has not yet been fully implemented.

There will be important data released later this month which will likely point to another year of double digit growth for the Chinese economy. For investors in the UK, China is looking stronger and stronger. With these key data points coming in, banks in the UK will be watching to see what happens when 2011 settles in.