The opening up of the Chinese economy from severe Covid restrictions along with interventions in so-called “Big Tech” is set to re-engage Singaporean capital, even though Western funds remain reticent.
In recent years, China has shifted from being a growth driver for sovereign investors to becoming nearly uninvestable due to both strong interventions against tech and the country’s draconian pandemic restrictions.
Canada’s US$181 billion Ontario Teachers' Pension Plan (OTPP) is pausing future direct investments in private assets in China due to geopolitical risk. Allocations to China amount to just 2% of its AUM and it will continue to invest in public markets and indirectly in private markets through fund partners and external managers. Meanwhile, ethical issues prompted Norges Bank Investment Management to exclude AviChina Industry & Technology from investments due to the “unacceptable risk” due to its sales to Myanmar, which expose it to humanitarian and human rights issues.
Yet, Singaporean sovereign wealth fund GIC has give its thumbs up to China, stating that regulation of tech giants has become clearer following a period of crackdown. At the recent World Economic Forum in Davos, GIC’s CEO Jeffrey Jaensubhakij said, “So in Chinese tech – Big Tech – that picture has become clearer.”
US-based state-owned investors are reconsidering their approach. Washington State Investment Board CEO Allyson Tucker was quoted by Reuters as saying, “I happen to believe the US-China rivalry will be one of the dominant themes of our times. As a global investor, we have to think about whether or not we continue to be allowed to invest in China. Right now, we have exposure in every single one of our asset classes. It used to be a much larger part of our portfolio than it is today.”
For China, Singaporean capital is far more important. GIC and Temasek remain the biggest SOI investors in China and China remains one of the most significant external markets. Yet, in 2022, even Singaporean sentiment cooled. The reopening of the Chinese economy is set to revive interest in China, even though SOIs have preferred Singapore and Hong Kong over Beijing and Shanghai for team expansion.
As we indicated last month, the easing of Covid restrictions in mainland China promises the potential for a surge in hiring activity with the expansion of existing teams and new offices. Added to that is the economic stimulus from an end to the disruption of draconian lockdown measures, which have severely undermined industrial capacity utilization and dented business confidence.
