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Exclusive-China invites global investors for rare meeting as economy sputters-sources

2023.07.14 03:14


© Reuters. FILE PHOTO: An evening view of the financial Central district and Victoria Harbour in Hong Kong, China, May 9, 2023. REUTERS/Tyrone Siu/File Photo

By Xie Yu and Julie Zhu

HONG KONG (Reuters) – China’s financial regulators have invited some of the world’s biggest investors to a rare symposium next week, three sources said, seeking to encourage foreigners to keep investing in the world’s second-largest economy despite its recent weakness and rising geopolitical tensions.

The meeting in Beijing next Friday will focus on the current conditions of U.S. dollar-denominated investment firms in China and the main challenges facing them, according to the sources who have direct knowledge of the matter and invitation documents reviewed by Reuters.

The gathering comes at a time when global investors and banks are warning that confidence is waning in China’s economic outlook. The country’s post-pandemic recovery is quickly losing steam and Sino-U.S. relations are at a low over national security issues — including Taiwan, U.S. export bans on advanced technologies and China’s state-led industrial policies.

Such a meeting, with a clear agenda to discuss challenges facing global fund managers investing in China, is rare, the three sources said, and reflected Beijing’s keenness to shore up confidence among foreign investors.

Large foreign and domestic fund managers such as private equity (PE) firms, known as general partners (GPs), and their investors or limited partners (LPs) including sovereign wealth funds and pension funds are expected to join the meeting, said the sources.

They also will be encouraged to provide suggestions to help address challenges facing their businesses in China and share their outlook on the economy, according to the sources and documents.

The global funds which will attend will likely send their China-based senior staff, though some senior executives will be flying to China for the talks, the sources added.

All three sources spoke on condition of anonymity as they were not authorized to speak with the media.

Weighed down by strict COVID measures, China’s economy grew just 3% in 2022, one of its worst showings in decades. Activity rebounded early this year after the curbs were abruptly lifted, but momentum has faded sharply since, while policy uncertainty and tensions between China, the U.S. and other Western powers have heightened.

The meeting also comes as some PE firms and their investors have been rethinking their China strategies after a years-long, bruising crackdown on private enterprises such as tech companies, which has cast a long shadow over PE investors’ return prospects and narrowed investment opportunities, separate sources have told Reuters.

Canada’s No. 3 pension fund – Ontario Teachers’ Pension Plan (OTPP) said in January it was pausing future direct investments in private assets in China.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), the country’s securities regulator, will address the attendees, according to two of the sources.

The CSRC did not immediately reply to Reuters’ queries on Friday.

The meeting is organized by China’s fund regulator Asset Management Association of China (AMAC). The AMAC didn’t immediately reply to Reuters’ questions.

Months of disappointing economic data has MSCI’s China share index down 2% on the year, against a 15% gain for world stocks, while the yuan is hovering at 8-month lows, pushing some investors to close up their China strategies.

U.S. dollar-denominated fundraising by China-focused venture capital and PE firms this year also had its weakest first half year in the past decade, data from industry tracker Preqin showed.

China-focused GPs only raised $5.5 billion in U.S. dollar-denominated funding in the first half of the year, Preqin data showed, a far cry from its peak of $27.6 billion raised in the same period in 2021.

China’s policies including security crackdowns, its harsh regulation of the tech industry and close monitoring of foreigners are convincing many global companies to steer clear of the country, said Andrew Collier, managing director at Hong Kong-based Orient Capital Research.

“Now that the economy is drastically slowing there is a new charm offensive to convince foreigners to come back,” he said, adding the measures might come “too little, too late”.

The symposium also follows signals from authorities last week that a crackdown which began in late 2020 on the technology sector had ended with fines on Ant Group and Tencent.

In another strong signal that the crackdown is over, Premier Li Qiang on Wednesday met firms such as Alibaba (NYSE:)’s cloud unit and Meituan, and urged them to do more to support China’s economy.

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