Looking at the Chinese economy, alternative investment firm PAG doesn’t look at the trendiest sectors as investment opportunities. Instead, when the Hong Kong-based manager sees them, it knows “which sectors to avoid,” said Weijian Shan, executive chair.

“Let’s say that whatever sector is hot, we typically stay away from because China is a capital-rich country,” he told attendees at the SALT iConnections New York 2024 conference on May 20.

Shan described the country’s savings rate as “on a league of its own,” being around 45% of the gross domestic product. The rate is “roughly equal to” the investment grade, he added.

“The problem is whatever sector is hot, everyone wants to do the same thing … therefore the higher margin is cheating a better deal,” Shan said, adding that this model for growing investments is not sustainable.

Shan added that China’s household consumption rate of 40% is “far behind” the U.S.’s 86% rate. As a result, China has been slowly shifting its growth model to private consumption.

What PAG has invested in instead is big “leading businesses” that cater to higher consumption. For example, the manager bought a 60% floating stake in Dalian Wanda Commercial Management Group, China’s largest shopping mall unit, for more than $8 billion in March.

PAG has $55 billion in assets under management.

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