Beyond The Great Firewall Of China — An Investment Immersion

Asia is the backyard of Foord’s global investment team, which is based in the booming city-state of Singapore. In May, the Foord Singapore investment team hosted 22 South African investment professionals on an 11-day, in-depth investment immersion of Singapore, Macau, Hong Kong, Shenzhen and Beijing. Julie Macleod-Henderson recounts the concept behind the tour and key observations from this maiden voyage.

The tour started in Singapore, home of Foord's global asset management team. From there, we travelled to four quite different Chinese cities: Macau, Hong Kong, Shenzhen and Beijing. The purpose was to facilitate an understanding of these markets and provide direct insight into the investment opportunities they hold. 

As a practical learning journey, the tour included site visits, company presentations, networking sessions and discussions with key industry figures across the investment spectrum. From AI to electric vehicles, retail to gambling, SOEs to property, delegates accessed unforgettable spaces and experiences that offered a rare on-the-ground perspective of what is driving this region and why we regard it as highly investible.

David Bacher, Chief Investment Officer at Corion Capital and delegate on the Understanding Asia Tour, explained, ‘China is a very important investment decision to get right, to establish what we believe is the correct investment rationale for our clients.’ Bacher noted that the ability to leverage Foord’s contacts and local-market knowledge was a game changer.

His conclusion? ‘The extent of what we saw and experienced was beyond expectation.’ These were some of his observations:

China's car market — the world's largest — stood out for its high-quality, competitively priced vehicles from numerous domestic manufacturers. For example, a car comparable to a quality European manufactured vehicle offered luxury and advanced technology at a much lower cost. China's focus on clean-energy vehicles and rapid market growth has therefore drawn global attention.

China’s Great Firewall had a significant impact: while some aspects were surprisingly positive, pervasive censorship was evident. Access to foreign apps like Google and WhatsApp was restricted, redirecting users to Chinese equivalents, under strict surveillance. The widespread use of surveillance cameras, as seen near Tiananmen Square, underscored the omnipresent state monitoring.

Pollution was unexpectedly low, especially in tier-one cities. Contrary to initial expectations of smog, the air quality was clear — thanks to efforts to relocate manufacturing plants outside of large cities. Over the past six years, pollution levels have significantly decreased in major cities.

China’s strict regulations quickly dispelled the perception of counterfeit goods flooding the market. It seemed clear to me that China deserves the label as the world's largest luxury brand market, contributing 35 to 45% of global luxury revenues. There was an abundance of high-end stores, such as Gucci and Louis Vuitton.

State-owned enterprises (SOEs) play a significant role in China’s economy, impacting poverty reduction and policy implementation. Despite concerns about transparency, well-managed SOEs — something we are not used to in South Africa — can provide substantial societal benefits.

China's work culture, witnessed at companies like JD.com, emphasised efficiency and dedication, reflecting a strong societal emphasis on work ethic and productivity. This cultural norm values personal investment in professional output.

Other notable observations were the domestic focus in the face of US trade wars, the focus on renewable energy and ESG practices, and the explosion of patent registrations. So, is China investible? Bacher points out that China is very attractive from a valuation perspective. ‘Coupled with a high work ethic and a country at the forefront of technology and innovation, it substantiates our thesis that we need to be overweight China. Don’t write off China,’ he concludes. ‘The country is a machine, maybe an automated machine, but it is a machine.’

I can only echo David’s comments. I was also struck by the sheer scale of innovation evident in each city we visited. The dynamic interplay between tradition and modernity, especially in places like Beijing and Shenzhen, was palpable. Witnessing firsthand the strategic efforts in technology and clean energy highlighted the region's forward-thinking approach. 

One of the standout experiences was taking an autonomous taxi ride with Pony-AI, which showcased the cutting-edge advancements in AI and transportation technology. Equally impressive was the hospitality and openness of the industry leaders we engaged with, who provided invaluable insights into the intricacies of their operations. 

This experience has reinforced my belief in the immense potential and importance of the Asian markets, especially China, as a cornerstone of global investment strategies. The cultural immersion and professional interactions have provided us with a nuanced understanding that will undoubtedly shape my understanding of these markets going forward.