Goldman Sachs: Global investors cautious on Chinese assets; Capital exit is crucial

David Solomon, CEO of Goldman Sachs, attended the "Global Financial Leaders' Investment Summit" on November 19. Solomon emphasized the importance of messages that reassure global investors about both attracting and facilitating capital movement in and out of China. He stated, "In that context, I think messages around the ability to both attract capital and have capital come in and come out are very, very important for global investors."

Solomon highlighted the complexities facing global investors regarding capital deployment in China. He noted that while there are positive signs of continued economic opening and transition, concerns persist among investors about the challenges of capital exit after significant investments over the past five years.

Solomon also mentioned that global financing activities peaked between 2020 and 2021, but have since fallen below the average levels of the past decade due to factors such as the Russia-Ukraine war, inflation, and regulatory challenges. However, he noted that the market is improving, and he believes that corporate mergers and acquisitions and financing activities will become more active starting next year.

Ted Pick, CEO of Morgan Stanley, echoed Solomon's sentiments, underscoring the significance of transparency and the gradual process of combating deflation. He noted that the current monetary policy, characterized by lower interest rates and more favorable mortgage conditions, is beginning to take effect. However, he cautioned that fiscal measures would require more time to fully materialize, particularly in the real estate sector, which he described as needing several quarters to stabilize.

Pick also pointed out that 30% of disposable income in Chinese households is savings, which is a very strong figure. "The name of the game here is to reignite consumer confidence, and that's something that takes a while to take hold. But we're seeing some green shoots," he said.

Pick stressed the significance of the Chinese market as the second-largest economy. He noted the significance of their business presence in Hong Kong, with 2,500 employees, and expressed optimism that as investor confidence builds, capital will follow.

As China navigates these challenges, the focus remains on fostering an environment conducive to investment and economic stability.

(By Kato Ip)

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