Blog For smart China investing, follow the reforms

For smart China investing, follow the reforms
During the Investing in China panel on 5 April, China veterans argued that there are opportunities for investors if they consider the impact of structural reforms and which factors are driving economic growth.

China’s secondary market has been at the “epicenter of skepticism”, remarked Helen Zhu, Managing Director and Head of China Equities at BlackRock. She told participants that market mindsets have shifted and since President Xi Jinping took office, there is a search for stability and a focus on sustainable, higher quality growth. Consider the impact of policies such as the anti-corruption campaign, energy market liberalization, land reform and the ending of the one-child limit. “Look at the beneficiaries of key structural reforms and for opportunities that are not yet priced into the equities,” she advised.

“The Chinese economy will continue on its path of transformation,” suggested Wu Yibing, Head, China, Temasek International in China. He pointed to three story lines that long-term investors in China should follow: the double-digit growth of consumption and the expansion of the services sector, the rise of the middle class, and the rapid emergence of “new-champion” companies. “China has quickly become a hub and fast follower of innovation,” he explained.

China is also emerging as a buyout market, Zhang Yichen, Chairman and CEO of Citic Capital Holdings, and K.C. Kung, Partner and Head of Greater China, MBK Partners, agreed. “Buyouts are happening already,” Kung observed. “The question is whether you as an investor have the capabilities to execute your strategy.”

With the economic slowdown, growth opportunities will naturally be more limited, Zhang said. Yet interesting buyout opportunities are there. For example, families with only one child may sell off companies if the single heir is not interested in taking over. There are no shortcuts to succeeding with investments in China, warned Zhang. It takes a lot of time and effort. “Doing business in China is generally very tough. It’s not a job; it’s a lifestyle.”