Irish fund managers counting on China to boost flagging interest in investment products may be waiting a long time. Chinese appetite for international investment funds has plummeted, says Andy Xie, a Chinese economist.

"People who sent money abroad last year lost half their money. It's going to take time before they venture out again."

New agreements reached with China's key financial regulators last week let Chinese investors access Irish-domiciled funds for the first time.

Signed in Beijing during the Taoiseach's visit, the deals were hailed as a major boost for the financial services industry, adding to Ireland's attractiveness as a location for international investment funds.

China's government has tried to encourage outward investment in recent years to reduce its large foreign reserves. And though not always receptive to Chinese investments, many governments now see the country, still enjoying enviable growth, as an important source of stability for the global economy. Ireland is among those vying for Chinese investment, says Barry O'Leary, chief executive of the IDA.

"China has such big foreign reserves and sovereign wealth funds, and the whole financial area has great growth. We want to make sure we get a good share of that business."

But problems at home have made Chinese investors much more cautious. Mainland stockmarkets have tumbled by almost two-thirds since the end of last year, sending shockwaves through the investor community.

"When domestic markets are really low, people don't tend to rush out and buy assets," said Xie.

Former investment bank­er Michael Pettis, now professor of finance at Peking University's Guanghua School of Management, says an appreciating currency will also act as a brake on Chinese investments abroad.

"Any outside investment just loses money. If you think that the currency is going to appreciate another 4-5%, you would have to earn a guaranteed 6-7% on your investment just to break even.

"Of course you can earn more than that by taking on substantial risk. But lots of Chinese investments have recently turned sour because of the financial crisis. So I don't see much appetite for international investment in the short term."

"China wants to gradually open up its capital sector but we shouldn't expect it to be like a tap," added Xie.

"In this cycle, there's not a whole lot we can do to encourage people to take on a lot of risk."

Investment is much more likely to come through mergers and acquisitions, with Chinese increasingly acquiring abroad, said Pettis.