An economic and policy advisor has warned about the risks behind New Zealand-listed companies that are linked to China’s economic growth as well as investors that own them, noting China is “not a risk-free bet.”
David Skilling, an advisor who founded Landfall Strategy Group in the Netherlands, advised companies to de-risk from their largest trading partner. “New Zealand firms need to understand that China is not a risk-free bet that it has been, and some of those risks are increasingly looming quite large,” he said.
According to Skilling, there is potential disruption in the geopolitical relationship between China and the United States, and he warned investors and companies that they should not wait for those risks to play out.
“Many New Zealand firms are still catching up with that new reality,” said Skilling. “We’re not going to be able to dodge that for too much longer either, because something’s going to go wrong in a bilateral relationship, that’s no fault of our own ... Or frankly, a choice gets forced on us either by China, by Australia, or the US.”
He is urging companies to consider their risks, noting some profit margin is being given up when high risks are involved. “You’re essentially paying an insurance premium, you’re giving up some profit margin to the risks against a future outcome that may or may not happen,” he said.
“If you’re the only person in your market that’s paying that insurance premium, you’re going to lose market share, your shareholders or your board is not going to be happy.”
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