Investors warned that economic recovery in China may take time, given the muted fundraising efforts, debt crisis in the country’s real estate sector, and geopolitical tensions. Even so, investors remain long-term bullish on the world’s second-largest capital market.
While some may be pulling back from investing in China due to the risks, the region has to be a part of every global investor’s portfolio, said top executives at some of the world’s biggest investment management firms at the Global Financial Leaders Investment Summit in Hong Kong.
“China’s economy is undergoing a massive transition that will take time,” said Mike Gitlin, CEO of Capital Group, on Wednesday at the event organised by the Hong Kong Monetary Authority, the city’s de facto central bank. “If you’re leaning into where the policy is going, you’ll have a better opportunity to benefit from investing in those areas.”
Multiple global investors took the stage during the second edition of the three-day event to speak about the myriad macro uncertainties that have made asset managers rethink their investment strategies.
“2024 is probably a year of recovery and the overall fundraising environment is still very tough for China,” said Yichen Zhang, chairman and CEO, Trustar Capital.
China-focused private investment funds saw a slow beginning to the year, which may drag down Asia-Pacific fundraising to the lowest numbers in a decade, according to a quarterly report by Preqin.
“The Chinese market on the private equity side was on a great run, with overlapping factors like tremendous economic growth, very cheap capital from international investors, and great entrepreneurs, we basically had all the stars aligned to create that sort of return,” said Zhang. “But all good things have to come to an end and we’re seeing the maturation of the Chinese market.”
Zhang made his comments at a panel discussing Asia and mainland China’s markets with Warburg Pincus’ CEO Chip Kaye and Zhang Lei, the founder and chairman of Hillhouse.
“People talk about US-China tensions as the driver, it’s domestic policy, domestic investments that are the drivers of what we see as the long-term opportunities in China,” said Mark Wiedman, head of the global client business at BlackRock.
Investors might be facing an uncertain future with the tech ban Washington imposed in August, restricting certain American investments in mainland China, Hong Kong and Macao in artificial intelligence, and semiconductors, among other sectors. But policy support in certain sectors is providing tailwinds for investors to ride on.
During the third quarter, the country’s economy, once the world’s fastest-growing with GDP growth rates averaging 10% for decades, gained some mild momentum. It’s GDP grew 4.9% in July-September from the year earlier.
The International Monetary Fund (IMF) has increased its forecast for China’s GDP growth to 5.4% this year, even as it warned that the real estate sector’s struggles would persist.
Late last month, the government announced a string of support measures including the issuance of 1 trillion yuan ($137 billion) in sovereign bonds, as well as its state fund Central Huijin Investment buying exchange-traded funds (ETFs) to prop up its slumping equity market.
“There is a massive policy-driven shift in China to diversify people’s retirement savings, which today are real estate in deposits, and in the future need to be more capital markets driven,” Wiedman added.