China policy “impossible to predict,” says short seller Carson Block

  • Investing in China carries the risk of macro policies that are “impossible to predict,” short seller Carson Block said.
  • China no longer promotes economic growth policies that consist of “generally treating foreign capital reasonably well.”
  • “You have to understand that nobody has an advantage anymore when it comes to predicting China policy,” Block said.

China has moved away from outlining its economic policy goals, and that’s a risk factor investors need to price in, activist short seller Carson Block said Tuesday as investors sought to assess whether the country will adopt zero-COVID measures following protests in major cities will give up .

The Chinese government has telegraphed policies for economic growth that embrace foreign capital for several decades, aiming “to treat foreign capital in general reasonably well,” the founder of Muddy Waters Research said during a CNBC interview.

“That’s not the goal anymore,” he said. “What you really need to understand about China is that … important macro policies are formulated by one person, and that is [President] Xi Jinping, and he is, for lack of a better word, a dictator,” Block said.

Block, who rose to fame in 2011 with an investigation into fraud at a now-defunct, Canada-listed Chinese forest company Sino-Forest Corp. revealed China’s policy goals under Xi have shifted toward improving its perception of threats.

China appears to have made some concessions to strict lockdown measures to curb the spread of COVID in response to massive protests across the country in recent days. Among them, officials in the southern manufacturing city of Guangzhou said some residents will no longer need to undergo mass coronavirus testing, according to an Associated Press report.

But Block said Wall Street investment banks’ forecasts of China’s potential next steps in its zero-COVID policy came from the “previous lens” of a government that was open to foreign investment, focused on economic growth and raising the standards of its citizens Life.

“You have to understand that nobody has an advantage anymore when it comes to predicting China policy. The guy you know who has a lot of ‘guanxi’ or connections in China? No, that doesn’t matter anymore,” Block said. “So you have to factor in what you’re willing to pay once you understand that you wake up one morning and [say], ‘It’s down 90%.’ Because this is China now. It’s impossible to make predictions at the macro level.”

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