Caixin
Nov 12, 2021 08:37 PM
ECONOMY

Caixin Summit: Primavera Capital CEO Explains Why Investors Need Not Fear China’s ‘Common Prosperity’

Fred Hu, economist and founder of Primavera Capital Group, attends a session about investing in China via video link. Photo: Caixin
Fred Hu, economist and founder of Primavera Capital Group, attends a session about investing in China via video link. Photo: Caixin

Global investors should not fear China’s “common prosperity” vision because the country’s leaders want to solve the country’s wealth inequality problem without losing their commitment to technology and the private sector, Primavera Capital Group CEO Fred Hu said Friday.

Hu, an economist who founded the investment group, made the statement during a dialogue session at this year’s Caixin Summit. He said that economic inequality has resulted in polarized communities and that a vision for increased shared prosperity is “attractive” for China, as well as globally.

He added that he is confident China’s leaders understand that the private sector, technology, and entrepreneurship are essential for the country to continue propelling growth.

Speaking remotely on the first day of the two-day economic conference, Hu said that increased regulation is here to stay, but China’s tech companies have “digested the implications of new regulations” while making progress to varying degrees on getting their businesses “more in line with regulations.”

“From this point, we should see more policy clarity and more market competitiveness, and cautiously renewed investor confidence ahead,” he said.

Since China’s leaders embarked on a wave of regulatory measures for a variety of sectors, the impact has been felt in stocks markets across the world, most notably on Chinese technology shares. According to a Bloomberg report, the Hang Seng’s Tech Index plummeted 46% in July and has since remained within a depressed trading range.

The litany of regulatory policies can be traced back to the suspension of Ant Group Co. Ltd.’s IPO in November 2020. This was followed by penalties on companies including an 18 billion yuan ($2.8 billion) fine on Alibaba Group Holding Ltd. on April 10, as well as a 3.4 billion yuan fine on delivery company Meituan in October. Other sectors that were targeted included for-profit education and online gaming.

On the geopolitical risk — the rocky China-U.S. relationship — Hu said that while it is true that “when the two elephants fight, the small animals in the forest all get hurt,” investors can do their part to breach the divide by focusing on common ground.

“Despite all the differences, China and U.S. share many common interests on issues such as global economic growth, stability, poverty, terrorism, climate change, pandemic ... No global challenge can be dealt with without U.S. and China working together. So hopefully the leaders will use their wisdom and foresight to manage the current tensions,” Hu said.

Hu also sounded an optimistic note about China’s economy, which he said has been bolstered by positive trends from increased urbanization, technology adoption, and the rise of the middle class.

The China investor said he saw opportunities in areas such as climate tech. “China is the largest energy consumer, the largest carbon emitter, but it's also the largest innovator, with new technologies to address climate change, from renewable energy to electrical vehicles to next-gen batteries,” he said.

Contact reporter Bertrand Teo (bertrandteo@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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