Jun 5, 2023 - Economy

Canadian pensions pull back on China investments

Dan Primack

Illustration of a stock trend line rising above the stars of China's flag, then bouncing and tangling between the stars before trending downward — Illustration: Annelise Capossela/Axios

Corporate America may still love China, but some institutional investors elsewhere have begun their own decoupling dance.

Driving the news: CDPQ, a Canadian pension system with around US$300 billion in assets under management, has stopped making new private market investments in China, and reportedly will close its Shanghai office after more than a decade of in-country presence.

This follows similar moves by both the Ontario Teachers' Pension Plan, which manages US$184 billion, and the British Columbia Investment Management Corp.
And it's not just limited to Canadian pensions, as Singaporean sovereign wealth fund GIC also has cut back on new China investments.

The big picture: This comes against the backdrop of rising geopolitical tensions between China and the West, plus concerns about China's slowed economic growth.

There's also the looming expectation that President Biden soon will sign an executive order limiting outbound investments in certain Chinese companies, although the timeline keeps getting pushed back.

Caveat: All three Canadian pensions, plus GIC, still have exposure to China. Moreover, the largest Canadian pension — CPP Investments — is not yet following its smaller peers.

The bottom line: Pausing new investments is much simpler than restructuring supply chains or replacing large customer bases. So if we see widespread decoupling, expect it to begin with capital "exports."

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Canadian pensions pull back on China investments

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