When it comes to paying up for the world’s common causes, like human rights, open-source research, climate change, ravages of war and famine in faraway countries, China likes to stress that as a poor country it lacks the means and urgencies to participate.

“The sausage,” as Berthold Brecht used to say, “takes precedence over morals.”

As a developing nation China has achieved astonishing progress though. In little more than two decades, helped by the globalisation of trade and production, it has lifted 400 million people out of poverty and overtaken Japan as the world’s second biggest eco­nomy after the US. It is predicted to be the world’s biggest economy within the next decade.

In its insatiable hunger for es­sential commodities it has conquered the African continent with ‘loan diplomacy’, connected with central Asia, teamed up with Russia and asserted itself milita­rily in southeast Asia.

China’s consumer market seems fathomless: at primary school we used to joke that one billion Chinese spitting at the same place could make an ocean. Western companies didn’t see the banter. For car makers, luxury goods companies, wealth managers or agri­businesses, Chinese consumers are the holy grail of business planning. For apparently ever-expanding sales figures, corporations were ready to hand over their techno­logy, to accept the role of a mere junior partner in joint ventures, to bow to political demands of censorship and marketing and to open up home markets in a way Chinese markets would never have granted access themselves.

Soon, most multinationals were successfully wedded to the Chinese consumers with earnings going from strength to strength. China as a market was too vast to be dismissed. It was therefore only logical that investment advisers too began to entice us to put our savings into this fairy tale of 21st century capitalism.

Investing at the Shanghai or Hong Kong stock exchanges proved profitable for a long time, if often with puzzling results. The gamb­ling habits of Chinese punters caused more volatility than we had expected and created remarkable distortions. Shares of one and the same company listed on both exchanges, for instance, often showed an exorbitant premium in Shanghai where domestic gamblers were prevalent.

Yet the inexorable rise of China’s tech giants was alluring. The so-called BATs – Baidu, Alibaba and Tencent – initially the Chinese versions of Google, Amazon and Facebook, have since evolved into vast conglomerates awash with money, investing into everything from banking to private equity, artificial intelligence to gaming, car hire services to communications. Their increase in value was as meteoritic as that of their US peers, which had no such luck to ever gain ground in China.

Yet the performance of Chinese shares over the past three years – and in 2018 in particular – was sobering. At the time of writing the Hong Kong Hang Seng Index, comprising the 50 biggest corporations by market capitalisation, stands at 25.601.92 – a loss of 22.78 per cent since January, when it still stood at 33,154.12. The Shanghai Stock Exchange Composite Index’s fall from grace was if anything even more dire. It suffered a loss 22.45 per cent since January and nearly 50 per cent in less than three years.

Should I really invest into companies that are instrumental to a regime annihilating a whole people?

This, however, does not mean that it is better if Chinese shares are  avoided. Past performance, as all our investment advisers will have to tell us, is never an indication for the future. So, after all the losses, is it perhaps a buying opportunity?

Investment decisions, if not just based on gut feeling or the blind following of professional advice, should be an attempt of rational deliberations. We form an opinion about management, financial standing, product pipelines, competition, market prospects, the influence of policies, the maturity of a business cycle and such. But we also ask moral questions. Do we wish to profit from war, the degeneration of our environment, from the addiction of hapless customers?

One may find it objectionable enough to invest in an arms manufacturer, or to support a company which profits from child labour. Others shun companies just affilia­ted with a despised political party or firms processing animal hides. These are personal preferences, not purely financial decisions. Yet they do matter.

I am neither a supporter of embargoes, nor of punitive trade restrictions. I do believe in the supremacy of free trade, which should never be carelessly subordinated to political or military strategies. Yet I feel queasy when I think of the one million Uighurs herded into ‘re-education camps’, with their children given to orphanages.

It seems the Uighurs, a Muslim, Turk-speaking people living in the oasis towns of the Taklamakan Desert since the 7th century, will soon become extinct. Vastly outnumbered by Han Chinese settlers, their ancient mosques and bazaars are closed down and the old Silk-Road town of Kashgar, a gem of oriental architecture, bulldozed.

The Uighurs are prisoners in their own country, under permanent surveillance, harassed, impri­soned, racially segregated. Should I really invest in companies that are instrumental to a regime annihilating a whole people?

In the case of China, political, commercial and moral aspects amalgamate. The companies we may consider for a financial investment are not just commercial enterprises. They are also political instruments. They help to rule. Accordingly, they are promoted, steered and handicapped according to the will of the Communist Party, which can reign unimpeded by law or the chimera of private property. It owns its citizens as it owns everything else. Ever wondered why Chinese want to buy property in Malta and put their money in our banks?

No matter how ‘private’ a company, when the government is fighting pollution, or curbing the excesses of shadow finance, as it does now, companies on the wrong side of politics will go to the wayside. Whoever is an eyesore to party discipline will be spirited away, often under the pretext of fighting ‘corruption’. Without meaningful, legal protection our investment too has little real value beyond sentiment and optimism. Who wants to be a minuscule minority investor if often the majority owner of a company has little chance to survive?

Trump’s ‘trade war’ with China has weighed heavily on Chinese stocks lately. The US administration, levying a 10 per cent import duty on $200 billion worth of Chinese goods, had threatened to rack it up to 25 per cent covering all imports from China.

I think the markets are overestimating the impact of US tariffs on China and underestimating the political stand-off. China’s exports to the US have even grown lately, because the cost of import duties was completely neutralised by falling exchange rates.

Listening to the utterances of Vice President Mike Pence and ‘trade adviser’ Peter Navarro, this is not so much about equal market access or respect for US intellectual property. It is an ill-defined, nebulous strategic rivalry. I am not so sure if a US government with ever shrinking expertise, including Trump’s juvenile troupe of advisers, have even a faint idea what they wished for and what an economic war with China might entail, hamstrung as they are already by minnows like Saudi Arabia.

China, in contrast, acts economically astute, competent and cherishes the advantages of international cooperation. It is hard to tell how viable official trade figures are, but as an economy it is growing clearly faster than any OECD country.

This means that the consumer market of a billion buyers will grow stronger. Companies operating on the main arteries of commerce like the above-mentioned BATs should profit increasingly, as they are not on a leash of personal data or consumer protection, as are their Western siblings. They are considered ‘national champignons’, the vanguard of AI development and Fintech, and enjoy political support – for the time being.

Many of the other national behemoths may do well too – banks, industrials. Yet in a world where truth is tightly managed, I am hesi­tant. And then, financially quite irrational, even foolish, I still see a noble people behind barbed wire...

Andreas Weitzer is an independent journalist based in Malta. He reports on the economy, politics and finance. The purpose of his column is to broaden readers’ general financial knowledge and it should not be interpreted as presenting investment advice or advice on the buying and selling of financial products.

andreas.weitzer@timesofmalta.com