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Risk from China’s trade issues overstated

Concerns about trade tariffs and IP rights in China should not put off foreign investors, according to a regional family office consultant.
Graham Cottingham, Quartermain

“The investment opportunities in China’s domestic market are largely insulated from the Sino-US tariff conflict and the headline-making rhetoric,” Graham Cottingham, group chief executive of Quartermain, a Hong Kong-based consultancy, told FSA.

Instead, investors should focus on longer-term trends such as rising wealth, the expanding middle class consumer sector and the rapid growth of the country’s service sector. These factors are accounting for a transformation in both the quantity and the quality of domestic demand.

Cottingham highlighted new economy industries as offering strong investment potential.

“China is a leader in renewable energy technologies and fintech, and the healthcare sector is growing quickly as private medical treatment becomes mere affordable and people live longer,” he said.

However, family offices and corporate investors should concentrate on investments in mainland businesses they understand well, he warned.

Quartermain also advises family offices on due diligence and cybersecurity. “It is about risk assessment as much as seeking returns,’ said Cottingham.

The China equity fund category took a hit in early 2018 after contentious trade talks, but since January has begun to recover in expectation of a trade deal resolution.

China equity category vs MSCI China – 3 years

Source: FE. In US dollars.

Part of the Mark Allen Group.