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Goldman Sachs CIO Warns Against Investing in the Chinese Market

Daniel Kim Views  

中양회 한복판에… 골드만삭스 CIO '중국 시장 투자하지 마'
On the 5th, police officers are saluting at the flagpole in front of the People’s Hall in Beijing, China. AP Yonhap News

The Chief Investment Officer (CIO) of Goldman Sachs, a representative investment bank on Wall Street, warned against investing in the Chinese market at this time. He cited difficulties in sectors that have been driving growth, such as real estate, and a lack of policy transparency from the Chinese government as reasons for the difficulty in trusting the market. This is in stark contrast to the Chinese government’s optimistic stance, such as setting this year’s GDP growth target at the same 5% as last year at the National People’s Congress (NPC).

Sharmin Mossavar-Rahmani, CIO of Goldman Sachs Asset Management, said in a Bloomberg TV interview on the 4th, “Our view at this point is that we should not invest in China.” She added, “Customers ask whether the Chinese stock market has fallen enough to be undervalued, whether the worst news has been ignored and passed by. We do not recommend moving to Chinese assets.”

CIO Mossavar-Rahmani stated that “the Chinese economy will continue to slow down steadily for the next 10 years” for the reasons above. The pillars that have led the Chinese economy so far such as real estate, infrastructure, and exports, are facing difficulties as they weaken. In particular, her diagnosis is that the real estate market has not yet found its bottom.

She pointed out that “China lacks clarity in policy decisions, and economic indicator data is uneven, which increases investment concerns. This somewhat limits the rise in the stock market.” She cited the strengthening of various legal regulations such as the counter-espionage law, emphasizing the importance of information security, and the cancellation of the prime minister’s press conference on the closing day of the NPC for the first time in about 30 years. The youth unemployment rate also increased market uncertainty by not announcing it for a certain period.

She questioned the government’s announcement that China’s GDP growth rate was 5.2% last year. CIO Mossavar-Rahmani said, “We do not know exactly how much the growth rate was last year and what it will be this year because the data is unclear. Most people think the growth rate was much weaker than 5.2%.”

Meanwhile, opinions are divided over the Chinese government’s GDP growth target of 5%. Bert Hofman, a senior researcher at the National University of Singapore and former World Bank’s Country Director for China, pointed out that the 5% target is “a level that requires a bit of stimulus.”

Daniel Kim
content@viewusglobal.com

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