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Howard Marks, co-founder of $200bn alternatives manager Oaktree Capital Management, has called on China to open up more “asset classes” to foreign investors as he set out an upbeat view of the world’s second-largest economy.
“I’m very optimistic about the Chinese economy in the long run,” Marks said on a panel at Shanghai’s flagship annual financial conference, citing the country’s infrastructure and the size of its middle class.
He proposed that China “expand the range of investment asset classes that are open to foreign investors”.
Marks’ comments come at a time when escalating trade tensions between the US and China have cast a chill over businesses in the mainland.
China relaxed some restrictions on foreign financial groups at the end of Donald Trump’s first term, leading to Wall Street giants such as Goldman Sachs and BlackRock launching new asset and wealth management ventures in the country.
But overseas asset managers struggled to gain traction during pandemic shutdowns that led to the mainland being cut off from the wider world and highlighted the differences within a state-dominated financial system.
Foreign exposure to many Chinese assets remains limited, including in a domestic corporate bond market where foreign ownership was just 0.29 per cent at the end of last year.
The forum in Shanghai’s Lujiazui, China’s largest mainland financial centre, comes at a critical moment for policymakers as they seek to restore confidence against the backdrop of a property market slowdown and a fragile trade truce with the US.
Marks’ visit comes shortly after JPMorgan Chase chief executive Jamie Dimon said he would “deepen” engagement with China, according to a state media readout of a meeting with vice-premier He Lifeng.
A year earlier, Dimon said parts of his bank’s business had “fallen off a cliff” in China, where the stock market has struggled with years of lacklustre performance, though supportive measures in September boosted prices.
Marks has made his name over the past five decades by diving into markets — among them high-yield bonds, distressed debt and China — when others were unwilling to do so.
At a time when others described it as “uninvestable”, Marks told the Financial Times in 2022 that he got comfortable with investing in China after years of high-level discussions with authorities and assurances that the rule of law would be upheld.
Three years ago, Oaktree seized Evergrande’s “Project Castle” property development in northern Hong Kong shortly after the world’s most-indebted developer imploded.
Los Angeles-based Oaktree, one of the oldest specialists in chasing companies for unpaid debts, was co-founded by Marks in 1995 and since then has grown to manage more than $203bn in assets.
Earlier this month, Marks told the FT that global investors were starting to “question whether US exceptionalism is a little less exceptional”, but added that there were doubts as to whether markets in Europe and Asia offered a meaningful alternative. “Europe still has sclerotic growth and a very high level of regulation, and China is still complicated,” he said. “Where else can large amounts of capital be deployed?”
“The proof of the pudding is in the tasting,” he said at the end of the Lujiazui panel. “People will gain confidence if markets perform for them, not based on promises but based on performance.”