PE and VC fund managers deserve sympathy at this time, having raised so much money recently only to be blindsided by Chinese policy shifts, as this Reuters article points out. But to continue throwing good money after bad is unconscionable. It would be far better to wait, watch and learn from what is going on at the moment in both Washington and Beijing.
Investing at this level in China has become next to impossible, if for no other reason than public exit strategies are likely to be held hostage by either or both of the US and Chinese governments as their trade war morphs into a financial war. Nevertheless, three strategies seem to have emerged as the consensus: 1) Invest in the government’s priorities; 2) Invest in domestic-focused firms; and 3) Brush up on Xi Jinping Thought.
Each begs rebuttal: 1) Investing in the Chinese government’s priorities is akin to investing in future victims of the US-China conflict; 2) Investing in domestic-focused firms is no assurance of avoiding US Entity Lists; and 3) Xi Jinping Thought is mass-market propaganda that is useless to read in isolation from the broader context of Chinese history.
Now is the time to keep the powder dry. There is further carnage ahead, believe it. This is especially for funds investing in the GBA from their offshore base in Hong Kong.Continue reading PE, VC money should be in less of a hurry