RESEARCH // January 24, 2022
China: Where Do Investors Go From Here?
Soon after the Chinese Communist Party’s 100th birthday celebration on July 1, abrupt changes by regulators in the rules governing the education sector led to a sharp market correction in the new economy and tech sectors listed in Hong Kong and the United States.

In line with the Chinese government focus on “common prosperity”, specific sectors viewed as becoming unaffordable to the masses—namely housing, healthcare, and education—came under increasing regulatory scrutiny.

Global investors struggled to digest the rapidly evolving regulatory developments that seemed to involve a widening number of industries and sectors. Combined, they have led many investors to conclude that no sector in China is safe from the whims of policymakers. Some investors believe that Chinese leaders are more clearly redefining the relationship between technology, society, and politics; however, others worry that politicians are testing unproven policies without clear direction and certainty that it will work.

In the wake of these developments, many investors are closely watching the Chinese market and staying on the sidelines. Several large banks and asset managers believe that China will continue to offer strong investment opportunities, while others, such as George Soros (who has been openly negative on China for a number of years), warn American investors about the risks of putting their money in China.

This paper lays out several issues that investors should bear in mind as they decide their future course of action regarding investing in China. More specifically, it concludes that the level of uncertainty related to investing in China has gone up with implications for returns and liquidity.

Read the entire paper here

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