Behind The Wall: How To Unlock Investment Opportunities in China?

[Music] well good afternoon everyone thank you very much for staying with us and I feel very honored um I'm Casey from from wi and pleasant to to host and moderate today's highly anticipated talk topic about evaluating the investment opportunity and unlocked investment opportunity in China so we have seen a great representation and composition of today's panel because each of us represent different angles and and the lenses from the table so Zoe has more than 10 years of experience and research expertise in international policies related to financial Market as well as economy and her recent focus is on China Japan and GCC region and Ethan founded um arti Capital which is a PE firm has long relationship working with Abu Dhabi to promote the connectivity and investment opportunity between the region and in China and myself wing for people who are not familiar with was winded we are the Asian leading financial information and Technology solution provider and we have broad experience over 30 years of experience consolidating information on the financial markets of different asset classes macroeconomic information globally industry information private Market as well as a company level information so without overo I think let's delve into today's topic um I want to start given how extensive your experience is I want to start with observations and trained so we've seen ample topics discussions at the very high level about to promote um the the crossb economy trade investment opportunities between the Mina region and China and based on your past experience and observations over the past what trends did you see over the past four months maybe let's start with Zoe sure I know it's truly a great honor to be here and uh to directly answer your question uh Casey one important aspect that I wanted to point out today is that the interdependencies between East Asia not just China but China Japan and South Korea and the midnight region in particular the golf cooporation council members are actually go beyond hydrocarbon and U today or five years ago people have been talking about uh you know China is going to become the large is going to become the largest energy importer from the region and guess what as of last year China imported China has maintained its position as the largest uh oil importer from Saudi Arabia latest development is that the both central banks uh the central banks of the PB and uh uh the Saudi uh Central Bank signed a currency swap agreement in the amount of about $6.9 billion dollar billion dollars which is about one10 of China's China and the saudi's oil deal uh last year and you are going to see this in terms of the the use of reming be in energy pricing not just in oil but also in natural gas and perhaps in critical minerals and then the second point with regard to interdependences going forward is also in the context of uh Renewables and that speaks to not just electric vehicles but in many ways in terms of re um nuclear energy as well the very first deal that UAE has made in terms of developing their nuclear energy sector is actually made with uh South Korea and literally a few days ago uh UAE signed a few months ago UAE signed nuclear deal nuclear energy deals with the Chinese energy uh nuclear energy operator so from that perspective what we are going to observe going forward is the use of mbb in Commodities trading between the two regions and Deals Beyond hydrocarbon and in particular in Renewables yeah thank you for sharing with us the latest economic and policy development and E why don't you tell us some of your front row experience from investment what did you see over the past year yeah from our experience from our observations after the lockdown uh finished this in China finished this early this year we received a lot of requests from Chinese companies um they are very interest exploring the investment opportunities uh in Middle East and they they are very interest in the business potential environment and capital in the region in May this year we actually arranged a tour from Hong Kong and China arranged 20 Business Leaders to come to Abu Dhabi and Saudi Arabia and actually some of them already confirmed to expand their business into Middle East from investment and capital fro side the value and the value of Acquisitions and investment by Gulf funds into Asia country has claimed to $2.3 billion us this year it doesn't include the capital flows from passive and private Investments the there are several iconic deals such as an Abu Dhabi solvant funds investing into investing near1 billion us into a China EV aakers Neil mubadala confirmed an investment into a Chinese life science real estate for 100 million US dollar a month ago I guess except for the investment capital from Middle East to China I do see we do see a lot of interest from Chinese companies to invest into Middle East and expand their business um in the and using abudhabi as the Hub great thanks for for sharing the perspective indeed I think there are before there's Capital flow there is always business flow first right so myself I took three trips over the past two months to the region to really feel on the ground so these are all very encouraging points and news to hear um I think that said if we look at historical statistics um around 90% of the capital flow in the Mina region actually was deployed in North America European region rather than greater China so from your experience and and your consideration what could be the possible hurdles or considerations that people were seeing in the past if there was any to to prevent a higher than expected capital inflow into China so put in other words what could be the possible Catalyst in the future if we want to unlock these investment opportunities in China um yeah I yeah gu a little bit it has very very technical reason why the those Capital fls they invest into different Market in St of China when we look into the MSC Ro index um you know this is um is it's it's the Benchmark for the um the the the wild Benchmark index and US companies account for 70% of this index Japan UK France and Canada are near 20% of this index Hong Kong has a very small percentage while China not even in this Index this the huge a benchmark this um msci index is close to 15 trillion US dollar however China is the second largest economy in the world it's only placed as the msci emerging market index but not the world index so although this China account for 30% of this index and the AUM of this index is sizable at $ 1.3 trillion us is indeed less than 10% of the msci index AUM therefore the capital FL the capital which use the Benchmark index can only invest a very small percentage of their Capital into China this is the technical reasons I mentioned why the global funds invest mostly into other other Market inad of China I guess I guess you know even Ean you are right in terms of all the technical technicalities uh I but you know if I can just summarize what what you described one important reason at least historically why foreign direct investment into China has been a very important hurdle would be Capital control and this becomes particularly challenging uh in in light of recent news especially the Chinese economy feels fails to uh recover or snap back as expected and then on top of that obviously the geopolitical tensions between the United States and China doesn't help at all it used to be the case that CS in Washington DC the panel of US Government from different agencies chaired by the charity Department used to be the case that they care a lot about foreign direct investment into the United States especially from a Chinese government owned entities but now earlier this a few literally a few a few months ago President Biden signed an executive order with regard to outbound investment screening regime in specifically targeting uh American Capital that can potentially enable uh Science and Technology R&D in either sponsored by Chinese investors or in uh mainland China so from that perspective that geopolitical tensions is going to continue sort of sour deals that's the unfortunate news and remember everybody next year is going to be a election Year and that is not a good news for Capital flows to be to begin with and then finally I'll just conclude by saying that historically as Casey you mentioned earlier historically the Chinese market has even today the Chinese market has never been been been perfect and no foreign investors uh even even even even even said that they are perfectly happy with the Chinese market however Capital do capital crossb capital flows they do prefer policy predictability leaders come and to go CEOs come and go but a policy environment has been stable inside of the Chinese market however that has gone in the past few years now president shining recently to visited Shanghai in the hope of um Revitalize you ding style uh Southern tour to what extent that he can use the opportunity to stabilize or more importantly inject confidence in the Chinese economy that is very much on now in his uh dinner at APAC with um American American CEOs he could have had the opportunity to sort of send out a positive information focusing on the the CEO group but from my conversation with people who attended the dinner it turned out that people felt that he fell short to uh reboost the confidence so perhaps going forward we'll see more policy Bazookas hopefully but so far there is no policy bazooka we'll see what is coming yeah there so the there is a complex set of reasons different different considerations behind there's geopolitical reasons policy there is also index which creates vibrant exposure to the market and I think based on my past role as Goldman Sach investment bankers I used to facilitate hundreds of Global Investors to visit and meet Chinese companies and Chinese entrepreneurs and one of the common theme that I have heard from them is is they feel there is a natural disadvantage for these key decision makers of Global Investors to sit outside of mill in China so so they have a limited access to and they don't even know where to find the source of information even those information exists somewhere so there is kind of like the limitation of information transparency and Trust in relationship so all of these kinds so that's why also for for us we feel there is a natural obligation and responsibility for for way to be here in the region and be Global so very important for for us to build the information investment infrastructure and sometimes I heard the earlier panel talking about educating investors educating investors globally on where and how the vast approach to look at insightful information about China about China opportunity so I think looking forward looking ahead into the future what are the investment opportunities that you think lies in China in the next one to two years um could that be in different asset classes like public and private equities debt or or the passive index the passive investment vehicles or in what other segments that you see I think maybe start with with Zoe sure I think index investment is always relatively easy and it you know you don't have to pay your lawyers in terms of um advisory fees especially given uh the executive order in terms of outbound investment screening that specifically is targeting the private private Equity deals right um but I would say sector-wise you would want to pre you would want to look at the SE sectors that are most geopolitically resilient and from my conversation with American Business Leaders as well as uh business business entrepreneurs in China there are three sectors that are particularly interesting which is food security climate change and Healthcare and aging and these three sectors are The Cutting Edge Theme connecting United States China and the Middle East and it doesn't matter who comes uh which president comes out hopefully not Donald Trump but uh uh those three sectors is going to be geopolitically resilient okay Ethan yeah from our perspective we see a very good investment opportunity in the ne the new energy vehicle sectors we expect uh first of all we expect a global penetration rate will jump to 50% from current below 20% in 2030 um secondly we we see that no last year in 20 22 the E penetration rate in China is reach 28% versus the global penetration rates of 15% as mentioned we expect the China e penetration rate to continue its lead where there will be ample investment opportunities globally we expect e sales will go over 30 million units every year or can generary more than 2 trillion of Revenue among the global opom makers China China e makers have been at the Forefront of developing ews and related Technologies striving to deliver the best value proposition to Consumers we are now beginning to see the hard work of the e China e makers uh pay off the actually the export demand for Chinese cars have accelerate by 2.8 times over the last 3 years and China has even overtaken both Japan and Germany to become the top one opto exporting country in the first half this year demonstrating how competitive Chinese vehicles are in the Global Market within the China EV Market sectors we expect this TR create new opportunities in in automotive Technologies particularly the Adas system which we like which um and also that Chinese company are leading in the world we also fond of the technology related of smart copies battery management system as automakers use those um consumer facing Technologies to help to help defense station and also enhance overall customer experience as a leading investment house tic Capital has an e fund investing into this sment into the E Supply change and we expect that can generate very handsome return with manageable risk oh thank you so much for sharing your great minds I think it's all about balancing the upside the growth of these sectors as well as as you said the resilience of the sector managing the risk well and I think the audience probably have taken down some notes and when they formulate their investment strategy so thank you very much for for being with us today and I hope um if you have any questions about the ideas and welcome to join us in in some offline discussions thank you for your time thank you thank