China’s power crunch is a bigger concern than Evergrande, says top fund manager

Published Thu, Sep 30 20217:30 PM EDT

Power shortages in China are more concerning than the debt crisis facing property giant Evergrande, said a top fund manager who has been cutting his exposure to China. "I think we're a lot more concerned about the Chinese power crisis than Evergrande issue because ... this has serious implications," Rajiv Jain, chairman and chief investment officer at GQG Partners, said Wednesday. GQG Partners started reducing its exposure to China in its emerging markets equity fund around late 2020 or early 2021, said Jain. Meanwhile, the fund increased its holdings in India, Brazil and Russia as economic growth picked up outside of China, Jain told CNBC's " Street Signs Asia ." "We feel that there's a little too much focus on the growth aspects in China while the other markets seem to be recovering ... and there's where we'll find opportunities," said Jain. The fund's top holdings in emerging markets include the world's largest foundry Taiwan Semiconductor Manufacturing Co or TSMC, Indian IT services firm Infosys and South Korea's Samsung Electronics . China's energy crisis The effects of China's energy crunch could ripple through the global supply chains and disrupt the supply of consumer goods further , triggering a rise in inflation, Jain said. Already, global supply chains have been stretched due to the Covid-19 pandemic and shipping disruptions that have constrained the supply of various goods from apparel to semiconductors. China is experiencing a slew of power outages as a result of a shortage in coal supplies, tighter emissions reduction targets and greater electricity demand from manufacturers. Some factories — including those supplying to Apple and Tesla — were forced to close in order to limit energy usage, Reuters reported. Chinese President Xi Jinping announced in September last year that China is aiming to reach peak carbon emissions by 2030 and become carbon neutral by 2060 . That kicked off national and local plans to reduce production of coal and other carbon-heavy processes. Goldman Sachs and other economists have slashed their growth forecasts for China as the energy crunch hit the country's key manufacturing sector. Evergrande crisis Comparing with the power crunch, the debt crisis at Chinese property developer Evergrande will likely be "very well contained," said Jain. "Vast majority of the debt is domestic, and I think it can be parceled out to smaller entities and absorbed by others ... You've seen that movie before and obviously authorities are very adapt at managing this," he said. Evergrande has more than $300 billion in debt and has struggled to raise funds to pay banks, suppliers and investors.

China's energy crisis is a greater concern than the Evergrande crisis, says GQG Partners' Rajiv Jain

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China's power crunch is a greater concern than Evergrande crisis: GQG Partners

Street Signs Asia

Power shortages in China are more concerning than the debt crisis facing property giant Evergrande, said a top fund manager who has been cutting his exposure to China.