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How to play China’s tech crackdown and the potential winners


Bruce Liu (CEO of Esoterica Capital) talks with CNBC’s Arjun Kharpal on the occasion of the East Tech West, an annual event held in Guangzhou’s Nansha, China. It took place Dec. 1, 2021. Liu outlined a framework that allows investors to make investments in Chinese technology firms, as Beijing continues tightening regulations.

Bruce Liu is the CEO of Esoterica Capital and talks with CNBC’s Arjun Khrpal on the annual East Tech West event held in Guangzhou’s Nansha, China. This took place Dec. 1, 20,21.

GUANGZHOU, China — Beijing’s regulatory crackdown sent jitters through the market, but one fund manager has come up with an investment framework to navigate the uncertainty.

China tightened its regulation of the domestic tech sector in many ways, starting with data protectionTo antitrustIn the past one year. International investors were caught off guard by the swift actions, which have wiped billions off the nation’s value.

Bruce Liu is the CEO at Esoterica Capital. He said that investors need to align their approach with China’s goal of “common prosperity”, growing national champions and social responsibility, as well as state-led investments. “Common prosperity” refers Chinese President Xi Jinping’sPush for moderate wealth to all

Liu stated that “common prosperity”, which isn’t a zero-sum game, is about “growing the pie larger, and making it better and more equitable.” This could be a benefit to several businesses.

According to the investor, companies that tap into lower-tier cities or lower-income citizens of China should experience growth. He estimates China’s population at around 1 billion.

He stated that e-commerce companies are the future. PinduoduoA short video application KuaishouDelivery of food MeituanThese are the key players in this theme.

Kuaishou, Pinduoduo, and Kuaishou have a strong focus on rural China. Both businesses have aimed to assist farmers in selling goods to their users. Meituan offers a group buying service that allows residents of the same area or community to buy bulk goods at a discounted price. This can be used to attract lower-income Chinese citizens in small cities.

“These [companies]they are following cities in the bottom tier who are less well-served. These are all part of the central government’s blueprint. This is all about expanding the market. “That is happening from lower-tier communities,” Liu stated in an interview at East Tech West.

‘National champions’

Generalizations on Regulation

CNBC’s East Tech West conference focused on China’s tightening regulatory environment. Ben Harburg (managing partner, MSA Capital) said that there were many misinterpretations made about regulatory actions during another discussion.

I believe that a lot are making dangerous assumptions and spreading misunderstandings, which are impacting the market’s investment decisions. Harburg added that it can cause valuations to drop for us all.

These businesses actually have a better chance of success and the regulatory framework is more predictable than what is being promoted in Western media.

Liu stated that many technology companies which have been bought by investors were “all very inexpensive now.”