Future Fund chairman says to screen portfolio as Biden administration plans new curbs for Chinese tech companies.
Australia’s sovereign wealth fund, the Future Fund, is screening its portfolio for Chinese companies at risk from US investment restrictions, the chairman said.
The Biden administration plans to ban investment in some Chinese tech companies and increase scrutiny on others, sources say, as part of its plan to crack down on the billions US companies have poured into sensitive Chinese sectors.
Peter Costello, chairman of the Australian $243 billion ($164 billion) fund and former treasurer, cited the experience of Western investment in Russia being written off to zero after waves of sanctions effectively shut foreign investors out of the country.
“Is it foreseeable that something similar could happen in China? I think it’s foreseeable,” Costello said during a panel discussion at the Australian Financial Review business summit in Sydney on Tuesday.
“And so we very, very carefully went through as many companies as we could to try and drop stocks. Have we found all the companies? No, because you don’t know many of those Chinese companies.”
His remarks underline the hesitation of many big money managers who are choosing to shun Chinese assets because of political risks – including tensions over the war in Ukraine and over Taiwan – that see China and the West increasingly pitted against each other.
In October, the United States imposed drastic restrictions on exports to China of, among other things, American artificial intelligence (AI) chips, chip-making tools and supercomputers.
“What concerns us is that as this disconnect continues at the U.S. Department of Commerce, the Bureau of Industry and Security is announcing several Chinese companies to which you cannot export high-tech equipment.”
Costello gave a hypothetical scenario where Chinese-made drones could be found in Ukraine and their manufacturers were hit with US investment bans in response.
“I just think [this stance is] a sensible measure in this split world we live in,” he said.
However, Costello added that it was important for the fund to maintain its exposure to emerging markets and China was a big part of that.
His comments also come as Australia and China try to mend the fences after years of a diplomatic freeze, with Australia asking China to lift unofficial “trade blockades” on its exports.
The Future Fund was set up in 2006 to cover rising civil service pension liabilities and competes in size with Australia’s largest pension funds.
A spokesperson for the fund declined to comment on current China-related positions. The fund has historically reduced its exposure to emerging markets, including China, he said without elaborating.