China’s Changing Priorities May Offer Opportunities in Select Businesses
Investors may look selectively to businesses supported by China’s emphasis on health and wellness, domestic brands, and higher-value manufacturing.
China’s recent regulatory moves have rattled many investors who have exited Chinese names, fearing policy changes would cap future gains. But opportunities in China, while undoubtedly complex and necessitating careful consideration, are too compelling to ignore, explained Sands Capital Sr. Portfolio Manager Ashraf Haque in a recent radio interview (starts at 11:07) for Bloomberg Markets.
While the range of punitive regulations imposed on Chinese companies, ranging from after-school tutors to large ecommerce platforms, has created uncertainty, there are many areas, such as the consumer sector, that may benefit from China’s evolving priorities.
Haque said he does not believe Chinese regulators are trying to stifle capitalism or punish the wealthy. Rather, he sees China’s moves as aimed at reducing inequality, expanding access to healthcare, encouraging better health and wellness, and supporting higher-value manufacturing industries.
Chinese regulators are grappling with many of the same issues as their U.S. counterparts in dealing with technology companies that have attained near-monopolistic status, Haque explained. The key difference, he said, is that China has the ability to regulate these companies much more effectively. “I don’t think they are trying to destroy the Tencents and Alibabas; rather, they want to ensure fair competition,” Haque concluded.
References to portfolio companies provided for illustrative purposes only to describe China’s evolving regulatory focus on various industries. Tencent, Alibaba, and Anta Sports Products are holdings in various strategies managed by Sands Capital Management.
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