If investors want to make a long bet on China, how should they do it?
The Canada Pension Plan Investment Board, Hillhouse Capital Group and Caixin Global Ltd. hosted a roundtable on Nov. 27 in Beijing to discuss the topic, along with the findings of a survey of more than 180 listed Chinese companies across 28 industries that represented a market capitalization of more than $3 trillion. The survey sought to better understand how the companies consider the concept that longer time horizons create value opportunities.
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“The findings of this survey show that corporations in China have long-term aspirations, though this mindset can be impacted by various performance pressures,” said Mark Machin, president and chief executive officer of the CPPIB, in a news release.
“For instance, we found that while Chinese businesses were reasonably good at thinking long term, the capital markets generally are not, leading to a disconnect. Nurturing long-term corporate behaviour therefore requires concerted and co-ordinated action among all market participants.”
The survey found 80 per cent of respondents think they have long-term perspectives embedded into their corporate cultures. However, 51 per cent of executives evaluated on their current fiscal year or quarterly performance felt the need to cut down on factors like research, development and advertising, which have long-term benefits, in favour of more short-term financial issues.
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“I am a firm believer in investing for the long term,” said Lei Zhang, founder and chief executive officer of Hillhouse Capital Group.“It is Hillhouse’s goal to build businesses that produce sustainable growth across multiple decades. As an investor, this means partnering with and helping the best management teams to invest in [research and development], talent and innovation. Creating an ecosystem of like-minded, forward-thinking entrepreneurs, investors and allocators will further support the development of globally competitive businesses in China for generations to come.”
The survey also indicated companies believe the transition China is undergoing in moving to a more service-focused economy will encourage long-term thinking.
“The findings of our survey sparked more thinking to study corporate behaviours as the major market players,” said Shuli Hu, founder of Caixin Global. “By collectively addressing the questions raised, we hope to see Chinese corporates really thrive and truly become global champions.”
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