Much of the negativity towards the Chinese economy and investments is the result of a deliberate attempt by many developed markets to talk down China and its economic model, according to Tom Slater, head of US equities at Baillie Gifford.
Mr Slater runs the £6.6bn Scottish Mortgage investment trust, which has three Chinese companies among its ten largest holdings - social media company Tencent, the second largest holding, Alibaba, which is a competitor to Amazon, and search engine Baidu.
The stake in Tencent alone is worth over £400m.
Mr Slater believes those companies have become so embedded in the Chinese economy that they are key to the prospects for economic growth, making it difficult for western rivals to gain a foothold.
He said there has been a ten-fold increase in the level of disposable income for Chinese consumers in the past 25 years, with $25bn (£18.6bn) spent on Alibaba on 24 November, the day known as Black Friday, where retailers slash prices to bring in customers. On the same day all of the US retailers combined took $6bn (£4.4bn).
Mr Slater said the negativity around China, a view articulated by, among others, the fund manager Neil Woodford, is the result of “economists in the US and elsewhere, establishment people, who fear Chinese influence growing in the world”.
Dan Wang, an economist with the Economist Intelligence Unit, said Chinese growth has been achieved this year as a result of growth both in the investment and consumption sides of the economy, while the level of credit growth, something highlighted by Mr Woodford among others, as an area of concern, is, according to Ms Wang, being addressed by the government.
Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford, has been buying Chinese equity exposure this year, as inflation picks up.
Mr Slater also accused vested interests of talking down another of his big investments, US entrepreneur Elon Musk's electronic car maker Tesla.
He said the company faces many challenges, but the potential is sufficiently great to make the shares a good investment.
Mr Slater said that while chief executive, Mr Musk, “rubs people up the wrong way”, the growth of electric vehicles is inevitable, and will be driven as much by demand from emerging markets, where air pollution is rife, as developed markets.
Tesla is the most shorted equity on the US market, as professional investors bet against the shares of a company which has failed to meet profit and production targets.
He said commentary around the viability of electric vehicles and Mr Musk’s capability are driven by vested interests.
Mr Slater said: “Electric vehicles are essentially a new technology, and they massively disrupt the existing industry. So I think a lot of the negativity is from the carbon industry, planting articles in newspapers.”
The Scottish Mortgage investment trust has returned 210 per cent over the past five years to 19 December, precisely double the 105 per cent returned by the AIC Global sector in the same time period.
David.Thorpe@ft.com
