While China’s current geo-political situation with Australia may be considered challenging, its investment potential should not be viewed through the same lens, an investment expert has said.
Lewis Prescott, international CEO at Mingshi Investment Management, believes China is too big to ignore.
With GDP growth of 8.1 per cent in 2021 and boasting the world’s second largest share market, Mr Prescott believes ignoring China as a source of both alpha and diversification is a significant risk.
“We see an increasing number of Australian institutional and sophisticated investors looking to China for improved returns,” Mr Prescott said.
Late last year, in a blog penned for InvestorDaily, Rene Buehlmann, chief executive officer at abrdn, encouraged investors to put China in perspective.
He acknowledged the dilemma most investors face regarding China, noting that while some avoid it at all costs over human rights violations, others celebrate its economic and political model as a sustainable form of governance able to circumvent the sort of policy paralysis holding some Western decision-makers hostage.
“Today, the debate on China risks becoming polarised between extremes: invest in blind faith or never invest,” Mr Buehlmann wrote.
According to Mr Buehlmann, S&P 500 companies generate a staggering 18 per cent of their revenues from China.
Among those making the big bucks are Apple and Unilever, both among the most widely held stocks in the US and the UK, respectively.
“These examples underscore the intricate connectivity of global markets,” Mr Buehlmann said.
“Absolute calls to exclude China are misaligned with economic reality,” he argued.
“To ignore China is to abandon the global marketplace since, to be consistent, investors would need to divest fully of all holdings with any exposure to the world’s second largest economy.”
Ultimately, both Mr Buehlmann and Mr Prescott arrived at the same conclusion – China is simply too large to exclude from the international financial ecosystem.
