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US Investment Titan Gets Cold Feet Over China – Report

Editorial Staff

7 November 2022

, which oversees $125 billion in assets, is pausing its investments in Chinese equities because the firm is assessing whether putting money into the Asian country is wise after President Xi Jinping consolidated his power, according to the Wall Street Journal. The paper quoted unnamed sources.

Tiger executives, including founder Charles “Chase” Coleman, have told others that Xi’s re-election and his stacking the Communist Party’s leadership with loyalists at the recent party Congress could increase geopolitical tensions and meaning that the country’s zero-Covid policy is likely to continue, the people are quoted as saying. 

The Chinese economy has been hit by Beijing’s zero-Covid policy and last year’s clampdown on a number of sectors, including technology and areas such as for-profit/after-hours schooling. The real estate sector is a worry – given its share of GDP – because of heavy debt exposures, as shown by the default of property developer Evergrande, for example. Beijing’s oft-stated desire to re-take Taiwan, its security crackdown on Hong Kong, alleged mass theft of intellectual property and encroachments into the South China Sea have also put it at odds with the West. President Joe Biden’s administration has also restricted exports of silicon chip tech to China. Another worry is that in the longer term, China faces a declining population problem as the consequences of the now-defunct “One Child” policy are being realised.

The MSCI China Index has slumped by 40.7 per cent since the start of January (in dollars); the MSCI Overseas China Index (in dollars) has crashed by 36 per cent.

The WSJ said that Tiger has reduced its hedge fund’s China exposure to the mid-single digits heading into the Chinese Communist Party’s recent congress. As a result, Tiger was able to avoid some of the market fallout following Xi’s re-election. The firm didn’t buy into the steep selloff.

Other US investment houses continue to push into China, notwithstanding concerns. Last September, for example, BlackRock raised about $1 billion for the first-ever mutual fund solely run by a foreign firm which is allowed to sell to Chinese individuals. Fidelity International was granted preliminary approval in August 2021. 

George Soros, the famed hedge fund tycoon, last year wrote in the WSJ that BlackRock’s push into the Chinese market was a “tragic mistake.”