- The Evergrande crisis and Beijing’s ongoing tech crackdown have rattled investor confidence in China.
- Yet, two experts said they’re still bullish on the country.
- “I believe very strongly that Chinese tech will weather the current rough storms,” Fred Hu of Primavera Capital said.
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The Evergrande crisis that’s roiling global markets and Beijing’s ongoing tech-sector crackdown have rattled investor confidence in China. Yet two experts speaking on a podcast hosted by Goldman Sachs said they’re still bullish on the world’s second-largest economy.
Among the big questions is whether China is still investable, which Fred Hu, founder and CEO of Primavera Capital and former partner at Goldman Sachs, answered: yes.
“There are clearly some legitimate concerns in the short term because there’s a lack of communication, lack of clarity of the government … So, I do understand why some investors may be frightened,” he said on the podcast published Tuesday. “But I believe very strongly that Chinese tech will weather the current rough storms… I think it would be a mistake to ignore the opportunities in China tech.”
Hu said he understands the rationale of China in stepping up its regulatory policies against tech companies, given that the Asian nation has one of the world’s most robust and influential tech sectors.
“The tech sector has played a massively beneficial impact … throughout the pandemic,” he said. “Nevertheless, the ubiquity and the growing role of tech companies has clearly also caused a variety of concerns in China as elsewhere.”
He enumerated three of the most common concerns when it comes to China’s rapidly expanding tech industry: abuse of market power, data security, and consumer privacy.
The current wave of regulation affects the consumer internet sector the most, he said, which includes fintech, e-commerce, and education-tech. But semiconductors, industrial automation, robotics, cleantech, electric vehicles, and renewable energies, he said, have been largely spared from the crackdown.
“Tightening of regulations unties monopolies,” he said. “Those are going to happen regardless, in China and elsewhere. It doesn’t mean it’s the end of tech investment opportunities in that. Far from it.”
David Li, an economics professor at Tsinghua University, agreed, saying he would have concentrated his investments on the tech sector if he was 30 years younger. He also gave investors a word of advice.
“I wouldn’t try to make comments on areas like politics or international relations,” Li told the podcast. “I think this is a new era of China … Business is business. Politics is politics. Don’t mix them.”
China in August issued a five-year blueprint that indicated it won’t be loosening its grip on the tech sector anytime soon. Authorities said they would actively work on legislation for national security, tech innovation, monopolies, and education, signaling a continuation of the nation’s data privacy and antitrust issues.
This has led some, such as George Magnus, an associate at Oxford University’s China Center, to warn about the risks in investing in the Asian economy.
“China is not your run-of-the-mill investment universe for reasons that we’ve been talking about, which is intervention of politics in the extreme,” he said on the podcast. “I think it’s a much riskier and a much more dangerous market than what it was six months ago.”
Magnus highlighted the last-minute cancellation of the $US37 ($AU51) billion IPO of Alibaba’s Ant Financial as well as the clampdown on ride-hailing giant Didi after its successful New York debut as examples.
Ant on Wednesday said it will integrate its data into a government credit-reporting system, according to its account on social media platform Weibo.
“There’s a big picture here which is really about the supremacy and the controlling influence of the president within the party,” Magnus said, referring to President Xi Jinping’s tight leash on the sector.