Thursday 11 June 2020 8:06 am

DEBATE: Is it time for western investors to abandon China?

Alan Mendoza is executive director of the Henry Jackson Society.
and Gordon Power
Gordon Power is chief executive and chief investment officer of Earth Capital.

Is it time for western investors to abandon China?

Alan Mendoza, executive director of the Henry Jackson Society, says YES.

The phrase “caveat emptor” should be ringing in the ears of China investors.

When it comes to business, western countries are waking up to Chinese policies that undermine free trade and distort the global market. Western nations, aware of Chinese dominance of many critical industries, will also move to find safer sources of supply. The trend will be for a US-led increase in tariffs and possible trade wars, which will damage returns.  

On human rights, given the surge in interest in re-examining domestic relations with racial minorities, it is unlikely that our populations will tolerate large-scale trade with a regime which crushes dissent and liberty at home and in Hong Kong, and persecutes its minorities like the Uighur Muslims. 

Environmental concerns over the sustainability of long supply lines will also increasingly move production closer to home.

With trade and consumer attitudes towards China turning rapidly, investors will soon face the threat of ending up on the wrong side of history. They should jump before they are pushed.

Gordon Power, chief executive of Earth Capital, says NO.

China is effectively back up and running, while most other countries are still grappling with the pandemic or taking tentative steps towards reopening their economies. Investors should not ignore the world’s second-largest economy and largest pool of consumers, with a population now over 1.4bn.

We must wake up to the reality that we are living in the Asian century. 

Not only does China offer unrivalled scale and breadth of market opportunities at a time of unprecedented economic uncertainty, but it is also taking the lead in areas of sustainable technology. For example, it has been providing a significant amount of solar energy products to the rest of the world and its focus on water treatment and electric propulsion is ahead of western markets.

China is inextricably linked to global supply chains and businesses. To abandon it now would be a huge missed opportunity, causing serious disruption to other countries and ignoring the reality that China is a significant contributor to the global economy.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.