1. China's government frequently gets accused of falsifying data, shouldn't that be a red flag for investors and a strong reason not to get China exposure?
These accusations have been flying around for years.
Yes, there's been some cases of local officials inflating data but it's one thing for an investor to go from acknowledging these cases to then concluding - wrongly, in my opinion - that the whole system of reporting data is rigged.
If you come to that conclusion and then decide you can't invest successfully in China or don't want to, you miss out on huge opportunities.
Successful China investors acknowledge that there are information challenges and then they adapt.
I see three specific challenges when trying to find good information in China.
Firstly, China's financial sector just doesn't have the same depth or range of media coverage as in more developed markets – you can argue about the reasons for that and whether its right or not but it's just a reality; secondly, Chinese companies and sectors are relatively under-researched compared to the levels of analyst coverage in say the US and Europe and, finally, coverage of China in the Western press, whether through editorial bias, misunderstanding, or lack of China research resources, can sometimes be sensationalist and inaccurate.
How we deal with this situation is invest in our onshore teams and build up a team of analysts and sector specialists who know where to find information, can interpret nuances of government policy, and have experience of investing in China's markets.
More than that, we take a bottom-up approach to research in China where we visit companies, talk to industry experts, and do market research to get a more nuanced picture of the companies and sectors we invest in.
By doing that, we create the resources to get the insight about what is happening in China that you can't get from government data and which addresses the informational challenges I discussed.