Investors in Korea bullish on China in 2014

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Investors in Korea bullish on China in 2014

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Korean overseas investment last year turned out to be heavily concentrated in the United States and China.

Investment in China has been growing especially rapidly in recent years and for the first time China is the second-largest recipient of Korean investment, surpassing Europe.

According to the Bank of Korea on Wednesday, last year Koreans invested $716.6 billion abroad, a 13 percent increase from $621.1 billion in 2013.

The United States remained the No.1 destination for Korean investors, attracting $173.6 billion, or 24.2 percent of the total investment overseas. That was an increase of 19 percent compared to $14.1 billion the previous year.

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But what stood out in 2014 was the significant growth of Korean investment in China, a continuation of the trend in recent years. In 2010, Korean investment in China amounted to $64.1 billion; that more than doubled last year to $132.4 billion.

In 2013, China ranked as the third most popular country for Korean investment with a 17.5 percent share, while investment in Europe ranked second at 18.3 percent.

Now the tables have turned. Investment in China last year accounted for 18.5 percent of the total, while investment in the EU was 17.7 percent, or $127.2 billion.

According to the Korean central bank, the trend toward putting more money into China was aided by the capital market opening further to foreign stock investors last year.

Additionally, investments in other areas, including the Chinese yuan and deposits, also increased. In the first quarter of last year, the Chinese government eased regulations that had limited the participation of foreign investors in the Shanghai stock exchange, the country’s main bourse.

One of the relaxed regulations allows foreigners to own stakes of as much as 30 percent in a single company. Previously, the cap for foreign investors was 20 percent.

Although direct investments still represented a majority of the investments that Koreans made in China, investments in stocks and bonds rose compared to the previous year.

Koreans made $69.6 billion in direct investments in China, which accounted for 52.5 percent of the total. This was a 21 percent increase year-on-year.

Investment in stocks and bonds, which accounted for 8.2 percent of total investment, saw sharper growth during the same period, jumping 28.4 percent from the previous year to $10.9 billion.

In particular, there was a significant surge in bond investments. Stock investments saw a 9 percent increase from $7.4 billion the previous year to $8.2 billion, while investments in bonds jumped 85 percent over the same period to $2.7 billion.

Unlike in China, investments in the United States were mostly concentrated in the stock market.

Stock and bond investments accounted for 48.2 percent of the total, or $83.6 billion, while direct investments accounted for 28.3 percent, or $49.1 billion. Koreans were mostly invested in stocks, which accounted for 37 percent of U.S. total, while bonds were 11.2 percent.

The United States and China combined represent 42 percent of total Korean investment overseas.

Foreign investment in Korea as of last year shrank to $998.3 billion, compared to $1 trillion in 2013.

While most developing economies increased investments in Korea, the United States, Japan, Europe and other advanced economies cut back.

The EU was the top investor in Korea last year at $265.3 billion, or 26.6 percent of total foreign investment. A close second was the United States with $260.9 billion, or 26.1 percent. Southeast Asia accounted for 16.6 percent at $166 billion. The United States and the EU have been the top two investors over the years as they competed for the top spot. In 2013, the United States ranked as the top investor in Korea, and in 2012 it was Europe that was No. 1.

However, investments from both the United States and the EU shrank compared to the previous year. U.S. investments were $271.6 billion won, 4 percent less than in 2013. Investments from the EU were down 1.9 percent. Investment from Japan, which accounted for 8.3 percent of the total, shrank from $87.2 billion in 2013 to $82.7 billion.

However, investment by China increased from $35.7 billion to $43.7 billion. China, which accounted for 3.6 percent of total foreign investment in Korea in 2013, was 4.4 percent last year. Investment from Southeast Asia also grew from $163 billion to $166 billion last year.

In the case of the United States, investors put most of their money in stocks, which accounted for 75.7 percent of their investment total. Europeans, on the other hand, were heavily into direct investments, which were 57.1 percent of their total.

Chinese investors resembled their U.S. counterparts, with 52.7 percent of investments concentrated in stock and bond purchases.


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]

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