China’s growing clout on the world stage over the years has been shaking up geopolitics. One U.S. billionaire says, however, the country’s expanding economic largesse is creating new opportunities for businesses.
“Economically, for us, that’s actually great,” Mark Lasry, chairman of Avenue Capital Group, says of the country’s growing strength. “Their GDP growth was through the roof. Everything is growing out there,” Lasry says.
“Because of the growth, I think we’ll end up doing very well. So for what we’re looking at, I think now is a great time to be investing in China.”
Lasry, who holds a fortune worth $1.8 billion on the Forbes Real-Time Billionaires List, spoke on Wednesday at an online forum on “Possibilities: US-China Relations in the New Era” organized by the Committee of 100 on a panel discussion on “Cross-Border Trade and Investment Trends.” The U.S.-based Committee of 100 aims to advance relations between the U.S. and Greater China, as well as the participation of Chinese Americans in U.S. society. Former U.S. Commerce Secretary Gary Locke recently became the organization’s chairman. Not all of the panel participates were as upbeat as Lasry.
China’s relative success in combatting the Covid-19 pandemic has given its economy a boost. After contracting by 6.8% in the first quarter of last year during the peak impact of the pandemic, China’s GDP was one of the few to expand for all 2020, gaining 2.3% for the full year. It expanded by 18.3% from a year earlier in the first quarter of 2021, one of the best-ever performances by an economy that now stands as the world’s second-largest.
That rebound contrasts with other nations in Asia. Avenue Capital has been facing difficulty in countries such as “India and Australia because those countries are shut down,” Lasry said. “The country that’s not shut down is China. So for us, we’re actually putting more money in China because we’re seeing more opportunities.”
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The company targets specialized lending in China. “I would say It’s probably one of the few times in the last couple of years where now China is becoming a much bigger part of our portfolio,” he said. “The reason for that is because of all the growth and all of the opportunities there.”
“Asia used to be that everybody was focused on what China was doing, and you wanted to — sort of — make sure that as long as China was growing, everyone was going to be fine. But, you were still very focused on what was happening in the U.S., and what the U.S. doing. Today, that is much, much less so,” Lasry said. “It used to be that you were U.S.-centric. I would say when you’re in Asia today, it’s very much China-centric.”
In environmental-related business areas, he said, “when you think about it, the U.S. used to have the moral high ground. And we don’t have that. That’s actually what’s really changed. It’s fascinating when you think about that China is one of the world’s largest polluters because of coal and everything that they are doing, yet they are very focused on electric cars (and) on doing all of these things that are going to be beneficial to the world. You would have thought that if there was going to be a leader in that, it would have been the U.S., but it’s not. That’s actually sad, because I think we are losing that moral high ground and I think we’re losing a little bit of the race to Chinese. But I think that’s going to continue.”
“What you’re seeing is our dysfunction in the U.S. is having a massive impact on, sort of, what we’re able to do abroad,” Lasry said. China “is taking huge advantage of that,” he said.
Morocco-born Lasry founded Avenue Capital Management with his sister Sonia in 1995; his family moved to the U.S. when he was age seven. Avenue Capital currently has about $10 billion under management. Lasry is part owner of the Milwaukee Bucks; his son Alex Lasry announced in February that he would run for the U.S. Senate as a Democrat against incumbent Republican Ron Johnson.
China is not without downside risk, however, Lasry added. “You worry about one thing, which is the legal system. What we worry about is: are we going to end up having issues and somehow going to get caught in some political mess where, for our fund, we’re going to have to try to use the legal system to our benefit, and you’re going to find that’s going to be hard.”
Ultimately, he continued, “we’ve come to the conclusion that risk is minimal, so we’re going to take that risk.”
Among other speakers in the “Cross-Border Trade and Investment” panel Joyce Chang, chair of global research at JP Morgan, was also upbeat about China’s prospects. “We actually think that China will match the U.S. economy in size before the end of
this decade. Covid probably moved up that timeline by anywhere between three to five years,” Chang said, noting that China is gaining a dominant position in industries such as solar energy and electric vehicles.
Investors “are feeling that some of the worst-case scenarios that could have occurred under the Trump administration aren’t likely to move forward,” she said.
Political scientist Ian Bremmer, president and founder of the Eurasia Group, was less sanguine about U.S.-China prospects. “I’m not an optimist in the near to medium term on the overall trajectory of the U.S.-China relationship,” Bremmer said. “The most important point is the technology aspect. That is because in the last 10 years, China has gone from very little capacity to world superpower status. They are largely at parody with the United States in the development of key technologies,” such as AI, facial recognition and driverless cars. “This is enormously important.”
“Biden at the end of his first 100 days framed the $6 trillion (stimulus plan) as ‘we have to do this so that Chinese don’t beat us.’ But the reality is that those same $6 trillion largely would have been the same $6 trillion even if China didn’t exist — it was a Democrat wish-list. It’s not as if Biden is really putting $6 trillion into ‘let’s think about how we ensure that we actually maximize our competitiveness vis-a-vis China.’ There are a lot of other domestic political issues going on,” he said.
Whereas if you look at China’s five-year plan, Bremmer continued, it’s about investment in China’s domestic market capacity and critical supply-chain technologies. “Why? Because for 50 years, the promise of the United States and our allies was that ‘China, if you join into a global integrated supply chain, we’re all going to get rich.’ And that’s by and large worked for us; it’s worked for them. It hasn’t worked for the American middle class — that’s a different story, but that’s largely an American political failing, it’s not a Chinese failing.”
“Now… we are saying, ‘Huawei, the national champion for technology for mainland China, actually, we’re going to put export controls on you. Your stuff is dual-use. We’re going to try to cripple you in terms of semiconductors and other aspects of your business because we don’t want you to integrate into the global economy.’ And the Chinese are learning very strong lessons from that. So first, the most innovative, advanced parts of the global economy increasingly are the parts that are actually breaking into two — ‘the splinternet of things’ as it’s called. That’s the proximate danger.”
“The more long-term danger,” Bremmer said, “is that if we have an entire generation of people in the West that are on their iPhones and their entire ecosystems of data are only oriented toward others in the West — and that’s the information that they digest (and) the filters that affect their information as consumers and citizens, and the Chinese are in a completely separate data system, that’s how you end up hating each other. That’s how you end up dehumanizing each other.”
“We already see that happening to a degree within the United States between sort of the right and the left, but at least, there, we actually still do engage individually with each other,” Bremmer said. “With the Chinese as citizens and the Americans as citizens, that’s increasingly not happening.”
“So longer term I think I am actually as a political scientist considerably more skeptical and concerned than I think most economists would be.”