One of the most common discussion themes among current and potential investors in China alike is represented by the timing element. In other words, is now the right time to back up the truck and invest in China or would it be wise to wait?
As (pretty much) always when it comes to such broad questions… it depends.
On what does it depend? Primarily on what exactly it is that you are interested in doing, on the nature of the investment(s) you are contemplating. To keep things organized, it makes sense to identify and separately analyze two main dimensions:
- Business-related investments, anything from expanding a business that already has a Chinese presence to establishing a new business in China. Needless to say, an investment of time and energy alongside capital will be required for this dimension
- The speculative dimension or, if you will, everything else. From investing in real estate to investing in a wide range of other Chinese assets, the name of the game as far as this dimension is concerned is strictly allocation capital in a certain direction so as to enhance your wealth
To start with the first dimension, it is important to point out that it is impossible to provide “one size fits all” solutions. At the end of the day, it’s all a matter of doing the legwork required to see what the numbers say with respect to your business idea. Is there genuinely demand for the product and service you are interested in approaching the Chinese market with? Do you have an edge compared to the competition and, if so, is that edge compelling enough to warrant going through with the entire process? What about the legislative and administrative framework surrounding that business idea, is it an endeavor encouraged by the Chinese authorities or, on the contrary, something that is tolerated or even downright discouraged (with the authorities possibly cracking down on that industry or implementing bans/restrictions altogether)?
As can be seen, it’s ultimately all a matter of gathering intelligence and acting on it.
Here at ChinaFund.com, we’re able to help with just that. As an entity that also walks the proverbial walk by actually having a robust business presence in China, we are able to help with everything from the preliminary research process to the actual implementation of your business model. Furthermore, should we be unable to help with absolutely all areas of interest surrounding your business, our solid local network will enable us to refer you to the best possible suppliers, contractors and so on. Simply visit the Consulting section of our website for more information and get in touch if there is something we can be of help with.
What about the other dimension?
Let’s just say that as far as the speculative dimension is concerned, it’s at least possible to provide “one size fits all” answers, even if this is not necessarily the optimal course of action, in light of the fact that even if overall market conditions are not exactly positive, there may very well be specific assets which represent screaming buying opportunities.
Nonetheless, we will go ahead and state that at this point in time, our opinion is as follows: China is THE jurisdiction to be in if you are interested in the big picture. However, the ChinaFund.com team considers most assets to be in “overheated” territory at this point in time, not just in China but in pretty much all jurisdictions.
After a decade of low interest rates corroborated with quantitative easing efforts, brought about by the decision of governments and central banks to combat the effects of the Great Recession, the overwhelming majority of assets are severely in “overvalued” territory. To put it differently, while the unprecedented action (unprecedented in both nominal terms and when it comes to the global reach of the measures, in today’s deeply interconnected world) of governments and central banks did not result in major inflation problems when it comes to metrics such as the CPI, it has most definitely resulted in severe asset price inflation.
As Warren Buffet (in)famously pointed out, cash is arguably the worst asset you could possibly choose in light of the fact that in the long run, it is quasi-guaranteed to lose value. However, the same Warren Buffet makes it clear that cash is like oxygen: you don’t notice it and are tempted to ignore its importance but when it is absent, it tends to become the only thing you notice. As dichotomic as the two statements may seem, there is actually a reasonable common denominator to be spotted: the idea that there are a select few situations in which building and holding onto a cash position makes sense.
In the opinion of the ChinaFund.com team, we are currently in such an environment.
As such, it might be wise to at least beef up your position when it comes to cash and cash equivalents at this point in time so as to have enough “ammunition” at your disposal to make potentially career-altering acquisitions when the time is right. Needless to say, ChinaFund.com is here to help you do just that. Whatever your current economic situation may be, we are more than willing to help you come up with and implement the right battle plan. As mentioned previously, the full details of what we can be of assistance with can be found in the Consulting section of our website.