How should investors approach China?

Interesting opportunities for investors

China made the headlines for all the wrong reasons in 2021, as slowing growth, defaults in the highly levered real estate sector, and an apparent move by the government to focus on social priorities above growth – including the introduction of investor-unfriendly regulations impairing certain sectors with little warning – all combined to damage investor confidence.

While we believe increased investor nervousness over China is warranted - the reset currently taking place in China is big and, at a minimum, has significantly increased the risk for investors - there may still be potentially interesting opportunities for investors in China, with the key question being whether current valuations adequately compensate for the perceived risks. Some say that following this recent period of turbulence, valuations are attractive for many Chinese assets - representing a possible source of strong returns in an environment where high global equity valuations, ti...