Investors urged to wake up to China’s potential

Pessimism about country not justified by on-the-ground facts, forum told

The future of China’s economic growth depends on strong innovation in the technology sector and investors will be wrong to sleep on the country’s potential despite the current headwinds, industry leaders said at the HSBC Global Investment Summit in Hong Kong yesterday.

“The idea that China is ‘uninvestible’ is so hyperbolic psychologically. It is not just healthy scepticism, but it is cynicism,” said Fred Hu, founder, chairman and CEO of Chinese investment firm Primavera Capital Group.

“I would say this is intellectually just shallow and lazy.”

HSBC, Hong Kong’s biggest commercial bank, is hosting the city’s largest investment conference this week, having taken over from Credit Suisse, which held its last flagship investment conference in March 2023 before its demise and subsequent takeover by rival UBS Group.

China, as the world’s secondlargest economy, was still the single biggest contributor to global gross domestic product growth, and the size and scale of its industries were still huge, he told a panel called “The new China playbook, China by numbers”.

“Any global investor who seeks to build a globally diversified portfolio, how could you ignore China? There is just no other way,” Hu said. “All of this pessimism about China is not justified by on-the-ground facts.”

The new China playbook would be about focusing on strategic emerging sectors and developing an edge, Keyu Jin, an economist at the London School of Economics, said at the panel.

China was clearly focusing on technological innovation such as artificial intelligence and quantum computing that would shape the future, Jin said. These areas provided “a high-return, high-risk model with lots of uncertainties, and China’s going after that”, she added.

“[China] is moving away from industrial policies that focused on midstream infrastructure and downstream applications in the past,” Jin said.

In the short term, the country’s technological innovations would not replace the property market in terms of the aggregate number of jobs it contributed, Jin said, adding Beijing still needed to figure out a way to implement policies strategically to address the problems it was facing.

Nicholas Lardy, a senior fellow at the Peterson Institute, said China’s private sector had a history of producing forwardthinking innovations and had a high level of productivity.

“If you want to go towards a more innovation-driven economy, you have to allow the private sector to play a greater role,” Lardy said at the panel.

Despite the headwinds, there remained clear opportunities in China, the panel heard.

China had faced “incredible complexity, uncertainties and risks” in recent years, including its rigid zero-Covid policies, a technology crackdown and the property downturn, but at the end of the day, investors must “understand the uncertainty and the cyclical risk-adjusted returns”, Primavera’s Hu said.

“China has tremendous potential as an innovative house, next to the United States,” Hu saud. “I am optimistic. China has proven it has been able to change from a copycat to become an innovator within two decades.”

The idea that China is ‘uninvestible’ is so hyperbolic psychologically ... It is cynicism

FRED HU, PRIMAVERA CAPITAL GROUP