Should You Stop Investing in China? - Evergrande, VIEs and other Chinese Risks

Should You Stop Investing in China? - Evergrande, VIEs and other Chinese Risks

A regulatory crackdown and ideological campaign by the Chinese government has upended the Chinese stock market, which comprises close to 40% of emerging market indices. We evaluate what is going on and what investors should do.

Topics covered include:

  • How has the Chinese stock market performed in 2021
  • Why has Cathie Wood and Ark Invest dramatically cut their Chinese stock exposure
  • What are examples of regulatory changes in China
  • Why the stocks of Chinese online tutoring companies that trade on the New York Stock Exchange fell 90% this year
  • What are variable interest entities (VIEs) and why they are a risky corporate structure for Chinese companies
  • How a high private sector debt burden could lead to a banking crisis or contagion in China
  • What are ways investors can invest in emerging markets while having a smaller allocation to China


Thanks to LinkedIn and Simplify ETFs for sponsoring the episode.

For more information on this episode click here.

Show Notes

Cathie Wood’s Ark cuts China positions ‘dramatically’ by Leo Lewis and Thomas Hale—Financial Times

Beijing to break up Ant’s Alipay and force creation of separate loans app by Sun Yu and Ryan McMorrow—Financial Times

China’s dodgy-debt double act—The Economist

China’s bid to stabilise its property market is causing jitters—The Economist

Related Episodes

218: Is China or the U.S. More Vulnerable?

249: Should You Invest in India?

328: Are You Underweight Chinese Stocks? Pros and Cons of Investing in China


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