23: Investing in China. Chingxiao Shao, Founder of Red Gate Asset Management

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In this episode we travel to Shanghai to talk to Chingxiao (best known as Ching) about equity investing in China. She starts by giving us a sense of life currently living in Shanghai and reflects on how the Chinese authorities have handled the crisis. She then describes her upbringing and education before explaining her immersion into the world of finance with Barings. The conversation analyses the market capitalisation of the Chinese stock markets relative to GDP and compared with the US, given they are now similar sized economies yet China’s stock market capitalisation is 1/10th that of the US. Ching explains the significant extent to which Chinese companies are under-researched and commensurately the opportunities for strong potential returns and outperformance, and her excitement given the immense developing domestic market.

She describes her decision to establish her own firm, Red Gate Asset Management, an equity manager with excess of $1 billion under management, and details the investment process which starts with filtering the 6,000 company universe into a workable subset, from which Ching and her team build a concentrated, long-term portfolio. With a relentless focus on investing with conviction, aiming to own quality growth companies, but bought at reasonable prices, she explains why being “on the ground” matters, and gives an edge. She explains, humbly, how they were selected by one of the world's largest sovereign wealth funds to manage China allocations, and the key investment lessons learned along the way. Ching describes the mistakes that she believes has made them better investors, the red lines that prevent them selecting certain types of companies, and the topical issues of regulation and fraud.

Finally she offers her thoughts on the Chinese love of gambling and stock market speculation, China’s place on the world stage, advice for young people thinking about finance and why above all else, she believes education is the critical component of success.