Fears that China has become ‘uninvestible’ are overblown – it is not Russia

While pandemic woes and rising commodity prices have shaken investor confidence in China, it remains an open, globally accessible and growing market

The real unease stems from Beijing’s regulatory uncertainty, but policymakers have caught onto this and promised relief

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A man crosses a bridge with a stocks indicator board in Shanghai’s financial district on March 16. Photo: AFP

Aidan Yao

Aidan Yao is a senior investment strategist for Asia at Amundi, based in Hong Kong.

Published: 4:30pm, 1 Jun 2022

A confluence of adverse forces has made investing in China challenging in the past 15 months. The brutal selling in certain parts of the equity and credit markets has eroded asset values at a speed and scale rivalling some of the worst market drawdowns in recent history. Confidence has depleted, so much so that some investors have started to question the investment potential of the Chinese markets.

“Is China still investible?” has, therefore, become a serious question to ponder. Answering it may require examining three key dimensions.

The first is the economic dimension: has the macro environment, within which companies operate and assets are created, changed sufficiently to challenge one’s investment thesis? Such a change might be a drastic deterioration in the country’s long-run growth potential, which could impact the future stream of income generated by assets.

Or it could be a substantial increase in economic uncertainty that clouds the outlook of corporate earnings (relevant for equity), business survival (important for credits) and income generation of assets (like real estate).