CPPIB to increase bets in China despite political tensions: Reuters

Canada Pension Plan Investment Board (CPPIB), the country’s biggest public pension fund, plans to continue deploying capital in China, despite political tensions between the two nations, Chief Executive Mark Machin said on Wednesday.

Following the arrest of Meng Wanzhou, Huawei Technologies Co Ltd’s chief financial officer on December 1, China warned Canada it would face severe consequences if it did not immediately release her.

Wanzhou, who was granted bail on Tuesday, faces extradition to the United States, which alleges she covered up her company’s links to a company that tried to sell equipment to Iran despite sanctions.

“There’s a lot of rhetoric always around these situations. If we cut aside all of the rhetoric, I think China will take a mature, cool-headed attitude toward pragmatic negotiations, so we won’t get too much wild action,” Machin told Reuters on a visit to Mumbai.

CPPIB, one of the world’s biggest investors, has 8 percent of its funds invested in China and has previously indicated it plans to increase that significantly in the next few years.

Machin, who previously headed CPPIB’s Asia business and spent more than two decades as an investment banker in the region prior to that, said CPPIB is going to keep “engaging and deploying” capital in China.

“We have lots of long relationships in China,” said Machin, adding he did not see any risk to having people on the ground there.

Machin’s comments come after a former Canadian diplomat was detained in China this week. It was not immediately clear if the cases were related, but Wanzhou’s arrest has heightened fears of reprisals against foreign businesses.

The United States is mulling issuing a new warning to U.S. citizens, including business executives, traveling to China.

On trade tensions, Machin said: “At the moment it doesn’t change the long term, but we hope, not just for ourselves but for everybody, that people can reach a pragmatic agreement and move on.”

With India having much younger demographics than China and being further behind in infrastructure development, Machin said CPPIB is exploring different opportunities in both countries.

“In India, longer term we continue to be very positive about demographics and the growing middle class, consumption and GDP growth – all these trends continue,” he said Machin.

“We are more likely to be investing in assisted living and old-age care in China more than India, while in India looking at things like education,” said Machin, whose fund just last week invested 8.86 billion rupees (US$123 million) in Indian online tutoring startup Byju’s.

The fund, which has net assets of $368.3 billion (US$276 billion) is also looking to find a strategic partner in the troubled non-banking financial companies sector in India that has been squeezed by a liquidity crunch.

Machin said he is not worried about the outcome of the 2019 elections in India, as long as there is policy continuity.

“If we are making infrastructure investments and real estate investments, we need regulatory and tax regimes that are pretty predictable in the long term.”

(Reporting by Euan Rocha; Editing by Robin Pomeroy)