Macroscope | Yes, investing in China carries risks...but the bigger risk is NOT investing there
Investors should always take account of predictable risks, or grey rhinos, when making decisions. And China is no exception. But right now investors should arguably be less worried about being gored by a grey rhino than of not having exposure to the Chinese economy.
Economists such as Harvard University’s Ken Rogoff continue to point out the risk of a hard economic landing in China. Geopolitical risks such as the potential impact on China of a further upsurge in tension in the Korean peninsula or a worsening of China-India relations, even if they are not strictly speaking grey rhinos, cannot be dismissed.
Investors might legitimately ask themselves where else on earth outside of China is going to offer the same kinds of investment opportunities on the same scale
Nor should investors rule out the possibility of deterioration in China-US trade relations.
But investors should anyway always quantify risk when evaluating strategies. And as regards China, at this point in time, the potential upside probably outweighs the risk.
US bank Goldman Sachs, writing last Thursday, expressed an optimistic macro-view of China.
Goldman expects “macro stability to be maintained in the coming months in the run-up to this autumn’s 19th Party Congress” and believes the stable growth platform will allow China’s policymakers “to maintain the focus on financial sector reforms.”