Billionaire investor Ken Griffin said China could prop up the global economy this year and help avoid an “ugly” slowdown in growth should the U.S. slip into recession.
In an interview with the Financial Times during his first visit to Hong Kong since the Covid-19 pandemic, Griffin said he was optimistic that China could exceed its growth targets.
“Why would anyone be optimistic about China? They are very clearly putting economic growth back at the top of their priority list,” said Griffin, founder of US hedge fund Citadel and market maker Citadel Securities.
China’s growth is poised to pick up after damaging Covid-19 restrictions were fully lifted in December. But an initial surge in global demand for Chinese stocks as the economy reopened has since weakened, reflecting weaker data on industrial output, manufacturing activity and the housing sector.
The economy grew 4.5% year-on-year in the first quarter, but that pace lagged the government’s relatively modest annual target of 5% — already the slowest pace in decades.
Chinese stocks are flat so far this year. Investors, by contrast, snapped up stocks elsewhere in Asia, with stocks in Japan, South Korea and Taiwan posting double-digit gains, often more than 20%. Fund managers continued to cut their growth forecasts for China, according to a Bank of America survey on Tuesday.
But Griffin remains optimistic that the country can deliver sustained growth and potentially provide relief to the global economy as the U.S. grapples with the threat of a recession.
“My economists think China’s GDP growth could be better than expected this year, and I hope they’re right,” said Griffin, whose $54 billion firm under management is generating record profits for investors in 2022 , making it the most successful hedge fund firm of all time. It runs global macro portfolios among other strategies.
“It would go a long way toward helping the U.S. achieve a soft landing. If China hits a speed bump when U.S. consumer spending stops, it would be a very ugly double-punch,” he added.
Griffin said that China remains an important destination for global investors and one of the two core sources of global innovation alongside the United States. “China is really important to investors because a lot of the changes happening (globally) are driven by what’s happening here,” he said.
Citadel and Citadel Securities are expanding in Asia with the opening of a new Tokyo office. Growing capital flows in the region have created “a plethora of opportunities” for market makers, Griffin said.
“Each country has its own story – in Japan, for example, the story is improving corporate governance and focusing on shareholder returns. In China, the story is the incredible size the market has become, combined with innovations that create opportunity.”
Citadel saw a 38% return last year at its lead hedge fund as Russia’s invasion of Ukraine roiled global markets and created opportunities for commodity trading in particular.
Although the market has stabilized, Griffin – whose firm has extensive expertise in weather forecasting – said there is still opportunity as the push for renewable energy creates “disruption in global commodity markets”.
He said Europe was lucky with the weather last winter and reduced energy demand more than he expected, but warned the cold snap could still have “brutal consequences”.
“We’ve been looking at how the grid is being reshaped, how is that going to change the flow of electrons, how is it going to change the flow of gas, where is the price going wrong across the network?”
In the U.S., Griffin said he expects inflation to remain sticky unless the Fed is willing to accept higher unemployment to keep inflation down.
“Inflation is definitely coming down now, but we’re not going to 2 percent anytime soon, we’re going to 3 percent,” he said. “And with wage growth so strong, it’s hard to be better than three points lower.”