China emerges as safe haven for offshore HNW investors during COVID-19 pandemic, says GlobalData

COVID-19 has altered a lot of long-established patterns and the offshore investment market is not immune to this disruption. As a result, high-net-worth (HNW) investors are increasingly looking for new opportunities. Against this backdrop, mainland China has piqued the interest of offshore investors amid the pandemic, observes GlobalData, a leading data and analytics company.

GlobalData’s report, ‘HNW Offshore Investment: Drivers and Motivations’, reveals that COVID-19 is pushing investors, particularly in North America and Europe, to invest offshore to minimize their tax liabilities.

Andrew Haslip, Head of Wealth Management Research at GlobalData, explains: “During the pandemic, less established booking centers in Greater China did better, namely the mainland itself. A successful pandemic response, offshore investor confidence in the special administrative region, and enduring currency strength from its peg to the US dollar appear to have served the region’s traditional offshore hub, Hong Kong, well in 2020 with growing offshore AUM after outflows in 2019 due to unrest.”

Even though, some of the greater activity in China is due to more structural changes, its financial markets are more open than before to non-resident investors, both via its connections to Hong Kong as well as directly. In addition, its bond market boasts relatively attractive rates compared to many Western markets, where the stock of negative-yielding debt continues to pile up.

Mr Haslip concludes: “The greater ease of investing foreign capital on the mainland exchanges as China opens up has meant a flood of offshore money into the mainland’s stock and bond markets.

“China’s regulators are working hard to ensure its markets are better able to soak up some of the offshore investment. And so more HNW investors booking directly into mainland China’s capital markets looks to be one of the enduring trends resulting from the pandemic.”

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