Howard Marks Urges China to Open Up Investment Opportunities

Howard Marks, co-founder of Oaktree Capital Management, which manages around $20 billion, is calling on China to allow more “asset classes” for foreign investors. He expresses a positive outlook on the world’s second-largest economy.

At a recent panel during Shanghai’s prominent annual financial conference, Marks stated, “In the long run, I’m very optimistic about China’s economy,” emphasizing the country’s infrastructure and the growing middle class.

He suggested that China should consider broadening the types of investment assets available to overseas investors.

Marks’ remarks arise at a time when trade tensions between the US and China are affecting mainland businesses. Notably, China previously loosened some restrictions for foreign financial firms toward the end of Donald Trump’s presidency, enabling major Wall Street players like Goldman Sachs and BlackRock to initiate new ventures in the country.

However, foreign asset managers have often encountered challenges during the pandemic, struggling to establish a foothold in a system heavily controlled by the state. This has left many foreign investments in the Chinese market, such as the domestic corporate bond market, significantly limited; foreign ownership was just 0.29% by the end of last year.

The Lujiazui forum, located in China’s largest financial district, is critical for policymakers seeking to restore trust amid a slowing real estate market and fragile trade relations with the United States.

Marks visited shortly after Jamie Dimon, the CEO of JPMorgan Chase, indicated he would deepen his engagement with China during a meeting with Vice-Chancellor He Lifeng, according to state media. Less than a year ago, Dimon noted that some of JPMorgan’s operations in China were “falling off a cliff,” with the stock market facing long-standing issues. Nevertheless, measures introduced in September have somewhat stabilized prices.

Marks has built his reputation over the last 50 years by investing in high-yield bonds and distressed debts, particularly in China, even when others hesitated.

Previously, he conveyed satisfaction with his investments in China, even amidst debates with officials about the support of the rule of law. Notably, three years ago, Oaktree acquired Evergrande’s “Project Castle” property development following the collapse of the developer.

Based in Los Angeles, Oaktree is a veteran in handling businesses with outstanding debts. Since its founding by Marks in 1995, it has grown to manage over $230 billion in assets.

This month, Marks shared with the Financial Times that global investors are beginning to question the concept of “US exceptionalism.” Yet, he remains uncertain about whether other markets, such as those in Europe and Asia, can provide viable alternatives. “Europe still has stiffening growth, very high levels of regulations, and China remains complex,” he observed. “Where can we deploy a large amount of capital?”

He concluded at the Lujiazui panel with the saying, “The proof of the pudding is in the tasting.” He believes that once markets perform based on results instead of mere promises, confidence will follow.