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Investor Baillie Gifford is betting extra on China as Asia attracts extra capital in a post-coronavirus world

Visitors visit China Telecom's booth during the 2019 World 5G Convention at Beijing Etrong International Exhibition & Convention Center on November 21, 2019 in Beijing, China.

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BEIJING – Global investors are increasing their bets on Asia, especially China, regardless of the coronavirus pandemic growth shock or mounting geopolitical tensions.

Just this week, Edinburgh-based investment partnership and early Tesla supporter Baillie Gifford announced that it would increase its investments in China by expanding its first overseas office in Shanghai.

"We believe that China's business model, innovation, has great strength and will attract global development. We therefore believe that the Chinese market is a great opportunity," said Amy Wang, head of China at Baillie Gifford, in a telephone interview on Thursday to a CNBC translation of their Mandarin comments.

The investment firm is locally recruiting in Shanghai and three directors will join the office, Wang said. Looking ahead, Baillie Gifford plans to attract more Chinese investors through onshore funds. The government, banks and credit institutions in China are already customers, and the company is in talks with insurers to become investors, too, Wang said.

The company says it has invested around US $ 55 billion, or around 17% of its assets under management, in more than 100 Chinese companies. An announcement on Thursday indicated that Baillie Gifford was also participating in a Series C investment round for Chongqing Jiangxiaobai Liquor, led by China Renaissance. The liquor company sells a version of the local Baijiu alcohol, which is popular with many young people in China.

Big investors like Baillie Gifford have had their eye on China for a long time. Even before the coronavirus pandemic reached global growth, many analysts expected China's economy to outperform the US and become the largest in the world in a few years. According to the Shanghai-based Hurun Research Institute, the Asian giant is already home to the three largest unicorns in the world – start-ups valued at more than $ 1 billion.

The Fortune Global 500 for this year, published in August, also found that for the first time, more companies were based in mainland China and Hong Kong than the US (124 versus 121).

Concerns about the impact of China's development on the United States have led the US government to take a tougher stance on Beijing, starting with trade and, more recently, technology and finance.

However, political pressure on both sides and the coronavirus pandemic have stalled cross-border investments, particularly in terms of capital flows between the US and China. The Rhodium Group found in a report released last week that investment flows between the world's two largest economies fell in the first six months of 2020 to their lowest levels in nearly nine years.

Greater interest in all things health

Covid-19 first appeared in the Chinese city of Wuhan late last year before a global pandemic erupted in the first half of this year. The efforts of the authorities to limit the spread of the disease through social distancing measures have helped accelerate trends that many investors have already observed, such as: Such as fresh produce delivery, online education and health care.

In the first three quarters of the year alone, the health investment business in Asia was valued at around $ 10.7 billion, around 26% more than in all of 2019, with China accounting for the bulk of the fundraising, according to financial data firm Preqin. Notable subsectors included medical devices and equipment, and pharmaceuticals, the company said.

Even a more health-related niche sector like alternative meat is getting more attention. Plant-based food and meat producer Green Monday announced Tuesday that it had raised $ 70 million. According to the company, this is the largest for the industry in Asia to date. TPG's The Rise Fund and Swire Pacific were among the investors.

"Ironically, Covid actually reveals how fragile and broken our food system is," said David Yeung, CEO and co-founder of Green Monday, in a phone interview Thursday. "Of course, African swine fever has been going on in China for more than two years. It has really devastated the pig industry and led to a sharp rise in pork prices that affects inflation and every household."

"In terms of investors," said Yeung, "rates in our space have actually increased this year as they see real consumer demand picking up, which is what the US is, what is going to be Europe and what is sure going to be up." Asia too. "

The Chinese government is also contributing to some of the recent waves of investment in the country.

On Tuesday, Shanghai-based electric vehicle startup WM Motor announced a 10 billion yuan ($ 1.47 billion) financing, which the company said is the largest ever in the country's EV industry.

The automaker said the latest round of funding was led by a government investor group in Shanghai, including state automaker SAIC Motor. State investment institutions from Anhui, Jiangsu, Hubei and Hunan also took part, and Baidu and Susquehanna International Group increased their investments in the start-up, according to WM Motor.

Earlier this year, competing Chinese electric vehicle startup Nio also announced a 7 billion yuan capital injection led by government-backed investors.

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