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This week we’re talking China with Chris Kushlis of T. Rowe Price. We ask all the China-investing questions on our minds, including how to think about Evergrande, this year’s tech crackdown, and the ever-present risk of a China slowdown or hard landing damaging the world economy. Chris highlights the key things to focus on when looking at China and offers a useful perspective to understand the year’s events as well as what many market-watchers get wrong.

Chris is an emerging market sovereign analyst in the Fixed Income Division at T. Rowe Price. Chris has 19 years of investment experience, 12 of which have been at T. Rowe Price. Prior to joining the firm in 2007, he was an advisor to the U.S. executive director at the International Monetary Fund. 

We discuss: 

• History: contrasting 10 years ago vs today in relation to China’s importance in global markets.
• Slowdown of growth: is this a natural component of a maturing market and demographics, or is it cause for concern?
• Regulatory issues: recent announcements and impact on markets/sectors, uncertainty in the future direction of regulation – how should investors think about this and factor into decisions? Are the affected stocks/sectors now fairly priced?
• Debt build-up: the market seems to suddenly get worried about a debt build-up in China every few years and Evergrande quietly became one of the largest borrowers in the world. Is there a problem here? We discuss how investors should think about China’s debt markets in both public, SOE (State Owned Enterprise), and private sectors?
• Access: A-share market opening up, de-listing risk on ADRs & VIEs – how should investors think/worry about these access points – does Chris think there are underappreciated risks or does the market get the pricing of them about right.
• Political issues: views on US-China relations, from global news this seems to have quietened under Biden recently, but is that a sign of a better relationship or just a quiet spell, and how important is geopolitics to investing in China?
• ESG concerns: how should investors approach the very serious concerns around human rights abuses in Chinese supply chains? Is there any possibility of getting enough transparency or influencing a behaviour change? Also, China’s role in the climate transition.
• Looking forward: Chris's expectations on developments, any particular risk factors to look out for, what would change Chris’ view?

One thing to take away

China is fascinating but it’s a huge country and very multi-faceted. It’s easy to paint it in black white terms, but that under sells it.

The most underappreciated thing about investing

You aren’t going to be right even close to 100% of the time. It's important to have the humility to know you’re going to be wrong sometimes, but still take a really clear view and back it.

Recommendations

• Sinica – episode on China
• Planet Money NPR 
• Imperial Twilight: The Opium War and the End of China's Last Golden Age by Stephen R. Platt

Further listening and reading

• Spotify playlist of Christmas songs 

China research from Chris & T Rowe Price

• 2022 Market Outlook
• China’s Green Credentials
• Regulatory concerns

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Each LCP investment uncut podcast is for information and marketing purposes only and does not constitute any form of investment or financial advice or a financial promotion (under the Financial Services and Markets Act 2000). All views expressed by the podcast hosts and guests are purely their own opinions and do not represent those of LCP, its clients or affiliates. Our podcast listeners should always seek independent financial or legal advice before making any financial or investment decisions. Please refer to the Legal Notices section on the LCP website for further information.​