Damn The Torpedoes, America’s Billionaire Investors Go Full Speed Ahead On China

Billionaire Ray Dalio has managed money for Chinese clients for 30 years. He’s not about to stop now. Billionaire Howard Marks suggests being careful about where to invest in China. But he’s not going anywhere. Billionaire Larry Fink, CEO of BlackRock, the world’s biggest asset manager, just last year launched a series of mutual funds that cater to Chinese consumers. He has no plans to pull a U-turn.

With some notable exceptions, prominent billionaire American investors aren’t budging from their belief in China. Nothing, it seems, can shake it — not Covid-19 lockdowns, not protests against Covid-19 lockdowns, not the Chinese government’s reaction to the protests, not the genocide of the Muslim Uighurs, not slave labor in Xinjiang, not any fraud connected to Chinese stocks, not the crackdown against democracy in Hong Kong, not the 30% decline in the Hang Seng since 2019, not persistent intellectual-property theft by Chinese companies, not U.S. companies moving manufacturing out of China, not the U.S. welcoming semiconductor companies leaving China, and not a sustained campaign by certain American politicians to paint China as the source of not only the global coronavirus pandemic but as an inevitable future military foe.

“China is still going to be the most successful country in the 21st century,” Jim Rogers, the renowned international investor who literally wrote the book on investing in China, told Forbes. “America was the most successful country in the 20th century, but we had many horrible times. But we were still successful. If you gave up on America, you’d have lost a lot of money.”

Forget that China is a totalitarian system headed by a single powerful person, President Xi Jinping, while the U.S. still holds meaningful elections and whose government has checks and balances that hopefully mitigate any outsized influence wielded by any one faction. Given that China offers cheaper labor, a ruling class thirsty for economic expansion and the dream of 1.4 billion Chinese citizens becoming an army of consumers, many billionaire investors aren’t willing to peel off from the process.

In November 2021, Dalio’s Bridgewater raised $1.25 billion for its third China fund. Bridgewater has managed private funds in China since 2018, with its first claiming a 19% annualized return through 2021, according to the Wall Street Journal. With that fund raise, Bridgewater became one of the biggest foreign managers of private funds within China. The raise was just the latest in Bridgewater’s history of dealing with China. Last year, Bloomberg reported that the Chinese government is among Bridgewater’s biggest clients. Dalio’s firm has counted China as a client since 1993, the report said. As of last year, the hedge fund managed about $5 billion of the state’s assets. Dalio, and Bridgewater, declined to comment further.

Marks, founder of Oaktree Capital Management, is one investor who’s signaled a willingness to keep the status quo largely intact.

Speaking at Forbes’ 2022 Wealth Summit, the billionaire spoke of the “Chinese miracle” of growing GDP by over 100 times over the past 40 years.

“And I have to believe that they’re not going to desert that,” Marks told Forbes. “They want to keep the economy growing, they want to keep the people happy, among other things.”

That helps explain why Oaktree has been willing to continue doing business in China while others have grown wary.

“People describe China and have been for the last year as uninvestable,” Marks told Forbes. “I don’t consider it as uninvestable. I think we’re going to continue to invest in China, but carefully, because we don’t. We’re not sure we know what the future holds.”

Oaktree’s foray into China hasn’t been uneventful. Evergrande, which was China’s largest property developer, defaulted on a loan backed by Oaktree. Marks’ firm was able to recoup its investment plus interest by selling Evergrande collateral in November, according to the Financial Times.

Fink’s BlackRock didn’t let China’s harsh response to the pandemic keep it from starting mutual funds that cater to Chinese investors last year. The announcement prompted George Soros, another billionaire investor, to call the move a “tragic mistake” in a Wall Street Journal editorial titled “BlackRock’s China Blunder.” BlackRock didn’t respond to requests for further comment.

Billionaires aren’t the only ones sticking with their China investments. In August, the massive California State Teachers’ Retirement System began looking for China-focused equity managers. In an email to Forbes, the pension fund said it currently owns about $3.7 billion of Chinese equities and that the search was intended to see if there was a better way to manage its exposure.

“Any investment manager we select will be required to follow our ESG risk factors in regards to their investment decisions,” CalSTRS told Forbes. “Having a dedicated China manager could provide us with more specialized expertise around ESG aspects of the China market compared to a broad global emerging markets approach.”

The pension fund noted, however, that the request would only establish a potential pool of managers that could receive funds and that there’s no guarantee any would receive an allocation.

At least one U.S. state pension fund, Florida’s SBA, has temporarily stopped its Chinese investments. And the endowments at Harvard and Yale, two of the biggest such funds in the world, are among those over the last year who’ve indicated that they’d review holdings of Chinese assets over concerns about human rights abuses within the country.

Kyle Bass, the founder of hedge fund Hayman Capital Management and a longtime critic of China and those who invest there, told Forbes that nothing short of U.S. government action will keep American dollars from flowing into the country.

“I think the only thing that will get investors to stop investing in China is going to be executive orders from the president or our regulatory bodies,” Bass told Forbes. “If U.S. national security was left up to the private sector, we’d all be speaking Chinese tomorrow.”

Continued billionaire investment in China evokes the William Faulkner line about how we love not necessarily because of any of our beloved’s virtues, but despite their faults.

“I’m aware of the negatives that surround China right now,” Rogers told Forbes. “But I haven’t sold any of my Chinese shares and I hope I’m smart enough to buy more should the right opportunity arise.”

Additional reporting by Maneet Ahuja.