Digitization, green transition, biotech, new consumption key growth drivers

China was the best performer in Temasek's global portfolio over the past decade, as the country's continuous opening-up agenda provided foreign investors with solid opportunities, the head of the Singapore-based investment company in China said on Thursday.

Wu Yibing, president of Temasek in China, said the 10-year internal rate of return (IRR) of the company's investments in China has outperformed its global portfolio as of the end of March, ranking highest among all the geographic markets that Temasek invests in. The company does not disclose specific IRR figures.

"China's reform and opening-up along with moves to attract foreign investment have provided companies like Temasek a real opportunity," Wu said, as capital provided by Temasek has accelerated the development of Chinese investee companies, especially those in early stages, while Temasek has earned good returns in the process.

It is clear that China is further advancing opening-up and promoting globalization, a trend that stands out in the global landscape of rising protectionism, Wu said, adding that protectionism and foreign investment regimes are part of Temasek's top-of-mind issues in a complex world.

Upbeat about such areas as digitization, green transition, biotech and new consumption patterns, Temasek's investments in China have outnumbered divestments over the past year as of end-March, resulting in a net investment, Wu said.

China accounted for 22 percent of Temasek's net portfolio value of S$382 billion ($287 billion) for the financial year ending March 31, unchanged from the previous year, meaning that the country remains the second-largest geographical exposure for the company behind Singapore, according to Temasek's financial review released on Tuesday.

As global equity markets — including China's A-share market — experienced fluctuations over the past year, Wu said Temasek has slowed down its investment pace in China and focused more on building a resilient and forward-looking portfolio.

While Temasek did not disclose the return figures of its Chinese investments in the financial year ending March 31, it reported on Tuesday a one-year Singapore dollar total shareholder return of a negative 5.07 percent during the period amid drawdowns in global markets and a challenging macro environment.

The short-term fluctuations, however, have not altered Temasek's commitment to the Chinese market as a long-term investor, said Wu. "In China, digitization has been reshaping industrial chains and bringing the real economy, especially the manufacturing sector, unparalleled competitiveness in the world."

He said the development of China's platform enterprises has not just promoted the digitization of retail and marketing, but also facilitated a systemic efficiency enhancement and automation of industrial chains in a wide range of sectors, such as robotics, logistics and clean energy, which is a unique phenomenon worldwide.

In that sense, Wu said the country's recent moves to encourage the development of the platform economy are "timely and necessary", adding that platform enterprises are likely to lead the development of generative artificial intelligence.

Speaking at a symposium in Beijing with several platform companies, Premier Li Qiang said on Wednesday that the platform economy has created space for expanding demand, served as a new driver for innovation-driven development and provided support for public services, encouraging platform companies to maintain firm confidence.

Temasek has invested in multiple Chinese platform companies, including PDD Holdings, Xiaohongshu, Ant Group and Didi.

Wu said Temasek's confidence in China's innovative and tech companies has stayed intact despite Sino-US economic tensions and US sanctions on Chinese companies.

"In the long term, geopolitical tensions may be transitory disruptions. The trend of globalization is irreversible in the end despite short-term obstacles as quality enterprises will always find ways to maximize their efficiency to survive."

Temasek is not the only foreign institutional investor to have voiced confidence in the Chinese market amid the recent market volatility. David Chao, Invesco's global market strategist for the Asia-Pacific, excluding Japan, said Chinese equities provide very attractive valuations and the government has abundant policy tools available to accelerate the economy as domestic inflation remains low.