Most of the commentary on the Shanghai market depicts the average Chinese investor as unknowledgeable and following the herd. However, a recent study that we’ve (kapronasia) just completed with Amber shows that individual Shanghai A-share investors are actually much more market savvy than commonly thought.

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Having a meaningful footprint in China has become a strategic imperative for multinational companies from around the world. The attraction is China’s seemingly insatiable demand for products, services, capital and technology. George D. Martin, partner and chair of the Faegre & Benson China Practice, sees the current acquisition boom in China as the logical culmination of foreign investment trends that he first observed when practicing in Shanghai in the mid-1990s. Martin expects this M&A trend to continue. But in the years to come, he advises, it won’t be just foreign companies on the buy-side of cross-border M&A deals involving China.

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China has become a synonym for future business growth. It is the business nirvana of the 21st century. It is the place to be. Companies are scrambling to get a share of the action. Not a day passes without some company making an announcement of an investment in their future which involves China.

Their reason for this scramble is the expectation of gaining vast increases in shareholder value. Reported performance would suggest that these expectations are difficult to realise.

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For certain luxury brands, China has already outstripped both Japan and Hong Kong as the largest single market in Asia Pacific. But the growing presence of luxury brands in China is bringing with it greater competition. The country’s busiest streets, such as Nanjing Road in Shanghai, are witnessing fierce competition among the world’s luxury brands. While some have warned that the China market is becoming saturated, for the time being the environment is still a positive one for potential entrants.

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While hard work and plain living have been revered virtues of the Chinese people for generations, there has been a growth in demand for foreign-branded or imported goods. But running counter to the growing habit of consumption in China is the traditional propensity to save. Though luxury consumption is growing, for most the dominant social idea is still prudent consumption and undertaking no more than you can perform.

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