Corporate America may still love China, but some institutional investors elsewhere have begun their own decoupling dance.
Driving the news: CDPQ, a Canadian pension system with around US$300 billion in assets under management, has stopped making new private market investments in China, and reportedly will close its Shanghai office after more than a decade of in-country presence.
- This follows similar moves by both the Ontario Teachers’ Pension Plan, which manages US$184 billion, and the British Columbia Investment Management Corp.
- And it’s not just limited to Canadian pensions, as Singaporean sovereign wealth fund GIC also has cut back on new China investments.
The big picture: This comes against the backdrop of rising geopolitical tensions between China and the West, plus concerns about China’s slowed economic growth.
- There’s also the looming expectation that President Biden soon will sign an executive order limiting outbound investments in certain Chinese companies, although the timeline keeps getting pushed back.
Caveat: All three Canadian pensions, plus GIC, still have exposure to China. Moreover, the largest Canadian pension — CPP Investments — is not yet following its smaller peers.
The bottom line: Pausing new investments is much simpler than restructuring supply chains or replacing large customer bases. So if we see widespread decoupling, expect it to begin with capital “exports.”