Overseas infrastructure will remain attractive to Chinese investors despite economic slowdown, experts say

Projects law expert Michael Watson of Pinsent Masons said that even state-owned investors would be looking to diversify their portfolios as a result of this month's Chinese currency devaluation and the falling value of the country's stock market. At the same time, the Chinese economy would continue to generate cash that needed to be invested, ideally in stable markets where the value of that investment would be protected, he said.

"Returns from infrastructure investments are perhaps not as stellar as promised by other, riskier investments, but they are steady and more predictable and long-term," he said. "The current volatility may well encourage investors to value long term, developed economy government-backed assets more where these long-term stable returns are available."

Research commissioned by Pinsent Masons towards the end of 2014 found that the UK could attract up to £105 billion in Chinese investment into infrastructure projects by 2025 with energy, real estate and transport projects set to be the biggest beneficiaries. While similar assets in emerging or developing economies often promised greater investment returns, these were "much more volatile" and lacked the guaranteed consumer demand or implicit state support for UK projects, he said.

Between 2005 and 2013, state-owned investment funds and other Chinese investors spent around £11.7 billion buying stakes in UK businesses, particularly infrastructure, according to the Financial Times. The Chinese have also purchased billions worth of office space and prime real estate, particularly in central London.

Helena Chen, a Beijing-based infrastructure law expert at Pinsent Masons, said that contractors would not be too concerned about currency fluctuations, particularly those that were state-owned and whose overseas investments were "aligned with government policy".

"To compare with the more persistent and significant yuan appreciation since 2004, this depreciation is still relatively small, and the quantitative impact of the exchange rate move is not likely to be big either, unless it is the beginning of a larger and more persistent period of depreciation," she said.

"In the past few years, the strong yuan has contributed to Chinese outbound investment, and the current limited depreciation won't change this – the yuan is still highly valued compared to a few years ago. The People's Bank of China is clearly stating that there is no reason for yuan to depreciate further, so we will have to wait and see which of the potential impacts come to pass," she said.

The People's Bank of China (PBoC), which is China's central bank, changed the calculation method for the yuan-dollar 'central parity' rate earlier this month. The change prompted an immediate 1.9% drop, bigger than on any single day in the currency's modern history; and the sell-off continued until the PBoC stepped in again to support the rate on 13 August.

This rate, which is also known as the 'midpoint', was previously reported within a band of 2% in either direction. It is now simply stated as the previous day's closing value. The rapid depreciation was prompted by traders buying and selling yuan significantly below the previous midpoint when the change was announced.

Chen said that the depreciation would have knock-on effects for inbound investment, as foreigners bringing capital into mainland China to invest in projects would "find that their dollars go further". China's major export industries including textiles, home electronics manufacturing, solar and steel would also benefit from increased competitiveness relative to their international competitors, she said.

"The depreciation so far will have a limited effect on China's growth slow-down because the most important reasons for this are structural, including a shrinking labour force and a considerable rise in real wages," she said. "The Chinese government has announced other measures to help, including plans to increase infrastructure spending in order to boost domestic demand."

"If the yuan depreciates further, the price of gold may go up and the gold mining industry will benefit. If the market expects further depreciation this may speed up Chinese overseas investment, especially from the private sectors, to foreign countries," she said.