Temasek swears by prospects in China

Temasek continues to deeply cultivate the China market and maintains confidence in the long-term prospects of the Chinese economy, said a senior executive of the Singapore-based investment company on Thursday.

China accounted for 22 percent of Temasek's net portfolio value of S$403 billion ($287.15 billion) for the financial year ending March 31. It is the second-largest investment destination for the company behind Singapore.

Although the percentage dropped from 27 percent in the previous financial year, the decline was completely brought by capital market fluctuations. It is also worth noting that the company's investments in China were larger than its divestments in the country for the financial year ending March 31, showing the adoption of a more active investment strategy when the market reached a low point, said Wu Yibing, president of Temasek China.

The investment company reported on Tuesday a one-year Singapore dollar total shareholder return (TSR) of 5.81 percent, while its 10-year TSR was 7 percent compounded annually.

Temasek is focusing on four long-term structural trends or investment themes, which are related to the future development of the China market, namely digitization, sustainable living, future consumption and longer lifespans.

"Each of our four investment trends provides tremendous opportunities that are trend-aligned with China's future development. The trends highlight innovation, green and sustainable growth, and the construction of an ecosystem. We see few markets like this where opportunities are so rich. As a cross-generational investor, we are confident in China for we have seen the vitality of businesses on the level of microeconomics," Wu said.

Quantitative changes in China's economic growth have become qualitative nowadays. Companies are making a transition from simply pursuing sales value and market share toward improving operational efficiency and profitability. Driven by the younger generations' demand for quality and their easy acceptance of new things, consumption is also making qualitative changes, leading to the rise of a large number of Chinese brands. Sustainable development, which was still a vision several years ago, has already become a precondition for the survival and growth of businesses and has even spawned world-leading companies specializing in green and sustainable development, he said.

"We hope to invest in the sectors which are in line with China's development trends in the decade that started in 2021. We will make investments in the sphere of new economy, including technology innovation and the future of consumption. We are also paying close attention to the next generation of technological infrastructures, such as Web 3.0 and the metaverse," he said.

In the new decade, digitalization will deepen further and see tighter integration with industrial and supply chains. The integration will become the highlight of Temasek's digitalization-themed investment in China.

"Generally speaking, we will continue to have an optimistic outlook for digitalization, including the digital economy. To promote their sound development, digital companies should consider whether they have taken measures to prevent monopoly and make more efforts to enable the entire industrial chain using the capabilities they have built during the process of growing into platforms, apart from focusing on core areas of their business. An increasing number of leading Chinese digital companies are making this move," Wu said.

He noted that China is a fast-growing market where it may take only a few years to upgrade from one generation of the economy to the next. If some companies are still doing business in traditional sectors through high-leverage practices, rather than keeping up with digital and green transitions, they will face challenges amid an economic downturn.

Looking ahead, as Chinese officials at various government levels have taken a series of measures, including the launch of predictable regulatory policies, to manage expectations for stabilizing growth, the efforts will stabilize international investor confidence. In the second half of this year, science-based and targeted COVID control and steady supply chain operations will be extremely important for further stabilizing investor confidence, he said.