The Chinese government clampdowns on industries ranging from tech to online education; worries of systemic risk in the country’s fixed income sector; and the potential collapse of Evergrande have all added to investor uncertainty in the China market. Despite these concerns, many are still keen to continue investments in the country.
China has always had some “short-term bumps along the way,” according to Carlyle Group’s chief executive Kewsong Lee, but looking at the bigger picture, he believes that many firms are underinvesting in the Chinese markets.
While speaking at the Bloomberg Invest virtual conference last Wednesday, October 6, Lee — whose firm manages over $270 billion in assets — said investors were asking the wrong question, given what China represents to the global economy.
“The question isn't, should I be investing in that region or not? It's really, what's the best way and how should we be doing it?” said Lee. “In my mind, I think there's more opportunity in that region of the world than not, especially since valuations have corrected a bit in that part of the world. I do think the mindset needs to be [very long term, consistent, and committed].”
Global investors have been stunned by Beijing’s actions to break up monopolies in its big tech sector, as well as regulations to perform cybersecurity reviews on all foreign public listings. With the Evergrande crisis also spreading fears of a systemic risk to China’s financial landscape, many of the nation’s biggest stocks have been in decline.
Despite the shock, other heavyweight funds have expressed similar optimism to Lee for China in the long term.
During the previous day’s session of the Bloomberg Invest conference, Blackstone’s President Jon Gray said his firm believes the Chinese market will “continue to grow faster than the developed markets.”
“They’ve got a very entrepreneurial culture, they’ve got a government that wants economic growth to improve quality of lives, and I think that means, broadly speaking, that China should do well,” Gray said.
Lim Chow Kiat, chief executive officer of GIC Pte, also said he does not view the Evergrande crisis as posing a systemic risk to China’s financial landscape, and that although the Singaporean sovereign wealth fund is examining portfolio revisions, it has no intention of exiting the Chinese markets.
On the flip side, Soros Fund Management’s chief investment officer Dawn Fitzpatrick said that her firm would not be investing any more capital into China in the foreseeable future. Representatives from Man Group and Elliot Management also raised their concerns regarding the outlook for Chinese stocks traded in the US.