Canadian pension fund CEO sees ‘China coming out of the worst’ since being hit by coronavirus
The head of Canada’s largest pension plan sees reasons for optimism in how China’s economy is rebounding from the coronavirus outbreak.
China, where the COVID -19 outbreak originated, has more than 70 per cent of its production back online and 99 per cent of its population back to where they migrated from during the country’s new year celebration, Mark Machin, chief executive of the Canada Pension Plan Investment Board, said in an interview. The country has managed to accomplish that while containing the spread of the virus, providing hope that other economies will be able recover as well, Machin said.
“The leading indicator is China, and it’s somewhat comforting to see China coming out of the worst,” Machin said. “Things are coming back to life, and the economy is reviving across the board.”
Economists from Bloomberg Intelligence estimate that the Chinese economy is operating at 70 per cent to 80 per cent of its normal level. Manufacturing firms in China have told Bloomberg News they are close to being able to resume full production, though they now face cancelled orders as the virus hits other countries.
Machin is optimistic that the price shock that’s threatening the global oil industry won’t drag on for too long. He cited a forecast from the Eurasia Group Ltd. that the situation has a 60 per cent chance of being short-lived.
The CPPIB, which had $420 billion in assets as of Dec. 31, is “built for something like this” and is broadly diversified across regions and investment classes, including long-term contracted assets like toll roads and renewable-power generation, he said. The fund’s sizable fixed-income portfolio has gained significantly, helping offset the losses from equities, he said.
Judging by the rebound in China, the economic recovery from the coronavirus in other countries may be more rapid than some are anticipating, he said.
“I don’t think it’s L-shaped,” Machin said of the recovery. “V-shaped is the optimistic scenario. The only thing we can look at now is China, because that’s where it first hit and that’s where the first recovery is happening.”