Matthews Asia: Is The ‘Smart Money’ Leaving China?

Matthews Asia: Is The ‘Smart Money’ Leaving China?
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Is The ‘Smart Money’ Leaving China? by Robert Horrocks, PhD, Matthews Asia

Over the past few years, there have been questions about whether the “smart money” is leaving China. For example, high-profile, Hong Kong businessman Li Kashing has been reorganizing his empire to lighten the amount of Chinese property assets he owns, and refocusing on other parts of the world, principally Europe. So, is the smart money leaving? Well, in this case, it is hard to know, as it can be very difficult to separate personal issues from hard-nosed investment decisions or tactical shifts in allocations between regions. In any case, mainland property assets are still a very significant part of Li’s wealth and in some cases, even though he has been shedding some property, associated companies still retain an interest in the management of those properties. More recently, too, other businesses with at least as strong a pedigree in China have been making significant acquisitions in their core businesses there, particularly in consumer-facing sectors. So, not all the “smart money” is necessarily moving in the same direction. There have definitely been some recent retrenchments from China by multinational companies. As American businessman Jeffrey Immelt has said, “China is big, but it is hard. Other places are equally big, but not quite as hard.” Sometimes it is easier for home-grown companies, focused primarily on their domestic market, to succeed.

Perhaps more significant are the recent sales by some Hong Kong banks of banking assets held on the mainland. Is this a way of taking some of the risk out of the balance sheets of Hong Kong banks? There has been some concern in recent years over the growth in loans to the corporate sector, and potentially in exposure to rising nonperforming loans on the mainland. Since last year, the Hong Kong Monetary Authority (HKMA) has been far more public about lending details of Hong Kong bank loans to Chinese corporates. Mainland assets at the end of 2013 had gr