American-born German investor Mark Mobius cannot get his capital out of his bank account in Shanghai, China, and is cautioning investors about changes in how China is managing its economy and foreign capital!
Mobius can be considered an authority on investment planning, having spent 30 years leading Franklin Templeton’s emerging markets investments. He is the founder of Mobius Capital Partners LLP and, according to his website, “the godfather of emerging markets.” He has also authored over a dozen books on the general subject of investing.
Mobious’s current point of view is interesting as he has always been known for his bullish view of China. So what led to this 180-degree shift in his outlook? Primarily, illiquidity and business red tape are why Mobius encourages investors to rethink investing in China and feels India is the best option. However, there are many other reasons that he believes supports his stance.
In this blog, we observe the three areas where India displays an edge over China in Mobius’ opinion.
3 reasons why China is becoming a less favourable investment destination than India
- Capital liquidity
In an interview that made headlines, Mobius said that the Chinese government was restricting the flow of capital out of the country without providing reasonable explanations. The government has also asked to represent records as old as 20 years to verify the source of the money.
The unnecessary red tape stifling liquidity without suitable explanation has earned the irk of Mobius and many other investors.
- Government ‘control’ over the economy
According to Mobius, the once-promising Chinese economy is now moving ‘in a completely different direction’ compared to its characteristics under former leader Deng Xiaoping, who is seen as having a more open-minded market outlook.
As per Mobius, the Chinese government has adopted a strategy of acquiring shares in various companies throughout the country. He interprets this move as an attempt to assert control over these companies. An increasing level of government influence on the economy reflects a bleak outlook for China as an attractive investment destination, per Mobius.
Moreover, he asserts that major US companies no longer view China as a primary avenue for investment, signalling a shift in their priorities.
- GDP and overall economic outlook
Shocking as it may sound, China’s GDP grew by only 3% last year. This is one of the lowest GDP growth rates it has seen in decades. Analysts seem to think that over and above the apparent effects of the pandemic and its restrictions, the government’s crackdown on private enterprise has got a lot to do with slowing GDP growth. Some experts also point to receding demand for Chinese exports.
Why does Mark Mobius consider India an alternative to investing in China?
Mobius, other experts and many countries strongly believe India could be a viable investment alternative to China. With a robust growth rate surpassing many other nations and a manufacturing prowess akin to China’s, India has garnered considerable attention.
Mobius also advocates for Indian equities, saying that they have the potential to deliver far better ROI than Chinese investments. He also identifies software, healthcare, and infrastructure as three key sectors primed for investment in India.
However, Mobius has encountered challenges while attempting to penetrate the Indian market. Despite being a portfolio investor, he laments waiting six months for approval to invest, underscoring the need for India to ease restrictions on foreign capital investment. He also emphasises that a more welcoming approach to foreign investments could arrest the decline of the rupee, further benefiting the Indian economy.
India, having endured decades of poor governance, policy inefficiencies, and bureaucratic hurdles, stands at a crossroads. The question lingers: will India successfully break through these barriers and achieve higher levels of economic growth? Watch this space to know more.
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Mark Mobius eyeing India as an alternative to China, redraws attention to the changing investment landscape and how India has a real chance to outperform China other countries. With the world’s attention firmly fixed on India’s progress, the stage is set for a captivating narrative as the country embarks on a transformative journey towards a more prosperous future.