Don’t invest in China now: Goldman Sachs Wealth Management CIO issues warning despite stock market fall

Goldman Sachs Wealth Management CIO Sharmin Mossavar-Rahmani on Tuesday said that investing in China could be risky despite recent dips in the country’s stock market. 

In an interview to the Bloomberg Television, Mossavar-Rahmani noted the common perception of China’s apparent cheapness but emphasised, “Our view is that one should not invest in China.”

She further expressed concerns about China’s economic trajectory over the next decade.

Supporting her argument, Mossavar-Rahmani said China will struggle with a weakening in the three pillars of growth up to now — the property market, infrastructure and exports. A lack of clarity on China’s policymaking, along with patchy economic data, add to concerns about investing there, she added.

She further noted uncertainties in China’s policy direction, particularly regarding information security measures and restrictions on data removal from the nation.

“It is not clear what the overall general direction of policy will be long term,” Mossavar-Rahmani said. “Policy uncertainties generally put a little bit of a cap on the equity market.”

In February, the benchmark CSI 300 Index dipped to a five-year low amid worries over the state of domestic demand at a time of escalating geopolitical tensions. It has since rebounded after regulators took steps to curb selling and boost institutional purchases.

She said the current steps are potential short-term stimulus measures but suggests that China’s real estate sector has not yet stabilised.

“Data is unclear — we really don’t have a good grasp of what growth was last year or what growth will be this year,” she also said, echoing concerns among a number of economists who doubt China’s official economic expansion figures.

Expressing doubt about China’s official economic expansion figures, she highlighted the lack of clarity in economic data, resonating with concerns among several economists.

Despite China’s formal publication of a growth rate above 5 per cent for 2023, she stated, “most people think that is not the real growth number — it was actually a lot weaker.”

China on Tuesday fixed a modest official growth target of around 5 per cent this year with a pledge to create 12 million jobs amid growing concerns over rising unemployment.

The country expects to create over 12 million jobs in urban areas and keep the surveyed urban unemployment rate at around 5.5 per cent this year, Chinese Premier Li Qiang said in his work report presented to the opening session of the National People’s Congress (NPC).

Li, in his 39-page work report, said a proactive fiscal policy and a prudent monetary policy will be continued, with the ratio of deficit to gross domestic product (GDP) set at three per cent and the government deficit to rise by 180 billion yuan ($26 billion) from the 2023 budget figure.

In February, China reported a dip in its annual foreign direct investment in 2023 since the 1990s. The second-largest economy in the world has been struggling to grow out of the pandemic lows. China’s direct investment liabilities stood at $33 billion in 2023, the State Administration of Foreign Exchange showed, which is a dip of 82 per cent from the previous year and the lowest annual figure since 1993.

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