Ark Invest’s Cathie Wood says China’s regulatory crackdown clashes with its goal of becoming a global innovation leader

Cathie Wood
  • China’s regulatory crackdown clashes with its aim of becoming an innovation leader, Cathie Wood said.
  • The star investor said the country seems to be in a state of retreat regarding the use of data.
  • Wood, whose Ark funds roared as tech stocks boomed in 2020, dumped Chinese equities in July.
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China’s months-long regulatory crackdown conflicts with its ambition to become the world leader in innovation, according to Ark Invest founder Cathie Wood.

The star stock-picker told Bloomberg in an interview released Tuesday that China seems to be in a state of retreat when it comes to technological innovation, for instance, by tightly controlling tech companies’ use of data.

“Every month there has been some new form of increased regulatory oversight, crackdown, social-engineering, nationalizing the online education companies,” she said.

“They seem to be retreating, in a sense, when it comes to allowing any kind of data to come out of the country,” Wood said. “So it seems like that could be contradictory to their desire to become one of the most innovative countries in the world.”

Chinese authorities last week issued a five-year plan that showed its clampdown on big businesses isn’t ending anytime soon, with Beijing planning new rules covering key industries including tech, national security and education. What the government sees as anti-competitive behaviour and data misuse will continue to be a focus.

Wood, who gained recognition for the strong performance of her funds in 2020, dumped Chinese stocks in July after Beijing cracked down on the tech and education sectors. She has reduced the weighting of Chinese companies in her portfolio to nearly zero, according to Insider’s analysis.

Her flagship fund, the Ark Innovation ETF, had less than 0.2% of its $23 billion of assets invested in Chinese companies as of August 9, compared to 8% in February, according to Bloomberg.

Wood has said she has redeployed cash raised from these stocks towards Ark’s highest-conviction names instead.

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