A couple of months ago, I wrote an article talking about the Chinese funds seeking exposure outside of the Middle Land, in which I argued that as China economics slows down, it's finally time for Chinese capital to diversify geographically. and the government is clearly encouraging this, as President Xi was at the contract signing of Fosun's €1.038bn acquisition of the Portugeuse Insurance Group in Beijing.
I have since discussed the topic with many people. Surprisingly, most people here in Paris weren't really convinced by my argument, questioning the motivation of diversifying to Europe, whose GDP growth is practically zero, from China which is still growing at 7~8% a year.
The fallacy in this argument is that investment is about return, not about GDP growth. Return is basically future exits in relation with current valuations, whether you measure in compound growth rates, cash-on-cash multiples or IRRs. In a high-growth country, current valuations will be high and vice versa. If the market is efficient, the percentage return should be the same after risk and all other relevant factors are adjusted, whether it's in the hyper-growth China or the stagnating Europe.
As China slows down, the old rules of investments will undergo a structural change. It makes perfect sense for Chinese capital which had been enjoying more low-hanging fruit than the other countries to start diversifying beyond its own vast borders, and behave more and more like most giant institutional investors in the West.
Not to claim that I've been vindicated, but today Financial Times reported in this article about President Xi's open encouragement on foreign investment:
If this still doesn't convince you that more and more capital will be coming from the dragon empire in Asia, I don't know what else could.