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Goldman Sachs’ chief executive has warned that global investors are still “predominantly on the sidelines” over deploying capital in China because of weak consumer confidence and difficulties getting money out of the country.
David Solomon said investors “continue to be concerned” about cashing out of investments in the world’s second-largest economy.
“It’s been very difficult over the course of the last five years to get capital out,” he told an event on Tuesday organised by the Hong Kong Monetary Authority, the territory’s de facto central bank.
“I think you’ve got a combination of issues that have global investors predominantly on the sidelines with respect to capital deployment,” Solomon said.
He added that investors would like to see “an improvement in consumption” in China and “continued progress in the opening up of the capital markets”.
Speaking on the same panel, Morgan Stanley’s chief executive Ted Pick said he agreed with Solomon. “Transparency is important and battling deflation takes time,” he said.
Deflationary pressures have increased in China, where the country’s leadership is trying to stabilise a property sector crisis and boost domestic consumption in order to meet its economic growth target of 5 per cent for the year.
Chinese stocks rallied in September after Beijing launched a stimulus package, including measures to boost the stock market. But the rally has cooled as authorities held off from making significant new fiscal spending announcements.
The CSI 300, China’s blue-chip index, on Tuesday closed down 11 per cent from a post-stimulus peak on October 8.
“The fiscal piece will take time, the real estate dynamic is going to take a number of quarters,” said Pick. “Clearly the name of the game here is to reignite consumer confidence and that’s something that takes a while to take hold, but we’re seeing some green shoots.”
The conference is a sign of HKMA’s sway over global financial institutions even as US-China relations fray. The annual event is attended by the biggest names on Wall Street, in part because the HKMA oversees hundreds of billions of dollars and is a valuable client and limited partner of many of the institutions.
Attendees included Apollo Global Management’s chief executive Marc Rowan, Blackstone’s president Jon Gray, and leading figures from buyout groups KKR, TPG, CVC and Carlyle.
Solomon and Pick were responding to a question from deputy HKMA chief Howard Lee about whether China’s stimulus package and “positive remarks” from Beijing officials, who stressed the importance of China opening up to the world, would make investors “feel more assured” about the country.
Earlier in the morning, China’s vice-premier He Lifeng delivered a speech in which he said mainland officials wanted to preserve Hong Kong’s status as an international financial centre while encouraging greater mutual market access between the city and the rest of mainland China.
The bank bosses spoke briefly about Donald Trump’s US election victory. Citigroup’s chief executive Jane Fraser said it had prompted a “big unlock” in demand for initial public offerings and mergers and acquisitions that had been “very gummed up” in recent years.
The prospect of reduced regulation “puts many CEOs in a good mood”, she said.
Jeffrey Perlman, chief executive of Warburg Pincus, echoed Solomon’s concern about the difficulty of taking money out of the country, saying it had been tough for the firm to take $1bn out of China last year by exiting investments.
“It is very, very challenging”, he said, speaking at the AVCJ Private Equity Forum, which also took place on Tuesday in Hong Kong.
https://www.ft.com/content/00f834a5-0715-4b86-b4c2-c40bf783a253
