‘Nothing to fear’ from Chinese communist influence
A leading international stock picker says there is nothing to fear from the influence of the Communist Party in Chinese companies.
One of the nation’s top international stock pickers, Hamish Douglass, says there is nothing to fear from the increased influence of the Communist Party in Chinese private companies such as e-commerce giant Alibaba.
The Magellan Financial Group chairman, who manages more than $90bn in his global equities strategy, said Magellan had moved to take a shareholding in Alibaba six months ago — the firm’s first direct investment in a Chinese firm — and was in the process of assembling a group of experts to advise the company on its China investment strategy.
Magellan has hired former CIA director Mike Morell as a key source of intelligence on not only the Trump administration but also on China. “Alibaba is actually our very first direct investment in China and it has taken us many, many years to get comfortable about the risk of doing that, and we’re doing it in probably the best business in China. I would say over the next 10 to 20 years we will be doing a lot more investing in China, but we want to make sure we know what we’re doing,’’ Mr Douglass told The Australian’s Strategic Forum in Sydney.
He also revealed Magellan had employed “some very informed consultants” to review the risks of investing in a company with growing Communist Party influence within its operations.
“China is very supportive of their large enterprises like Alibaba. They do not want to lose control of Alibaba. Alibaba has got a very large quantum computing lab,” Mr Douglass said.
“Quantum computing is very important. They’re developing semi-conductors in Alibaba. They’ve got the largest cloud platform. They’re by far and away got the largest data bank on consumers. And the Communist Party have a lot of cells operating within Alibaba. It’s a very large company and that’s obviously giving the party some real insight about what’s going on, on a day to day (basis) . I would describe it more as a partnership between the country and private enterprise.”
He said one of the keys to Magellan’s investment in Alibaba was finding a country that was “supportive of business” compared to many Western countries around the world that were “starting to lose support for business”.
More broadly, Mr Douglass said, it would be more risky not to invest in China than to be put off by any trade-war tensions with the US.
“China’s rise is not going to stop, and if you take a long-term view, that is one of the most important investment locations on the planet,” he said.
“To pass on investing in China is risky from an investment point of view. You will miss out on one of the biggest investment areas.”
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