Primavera Capital on Investment Environment & Strategy

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00:00We can start, I think, with U.S. China.

00:02We'll get to the tech side, the fintech side in a moment,

00:05but we did as well have the talks between President Xi and Trump last week,

00:09so I'm curious for your views on the outcomes from Busan

00:11and whether you were encouraged at all by what we heard.

00:15Well, I think the summit was successful,

00:17that both leaders have been able to put the bilateral relationship back on track

00:25with some stability and preventing otherwise a rare disastrous outcome

00:33for both countries and for the world economy at large.

00:36So I think the trade truth reached by the two leaders, by two countries,

00:41I think is really a great reassurance for global markets and for global economy.

00:49How do you see it developing?

00:51Because obviously there's big points of contention between both sides.

00:55It's difficult to really see how they'll be able to see eye to eye on areas,

01:00for instance, like rare earths, which remains a big bargaining chip for China.

01:04What do you think is the next step and the evolution of the relationship from here?

01:09Well, I think just the experience of the last couple of months has told us,

01:15like it or not, the two economies are still highly dependent on each other.

01:20And in fact, the world economy is still highly wide, you know, to be interdependent.

01:26So if you want to penalize a trading partner, whether it's by high-taf or expert control,

01:33yes, you'll exact the cost on your partner,

01:36but also you'll inflict a lot of harm to your own economy.

01:40Like this whole, you know, entanglement over there,

01:44whether it's cheap restriction or rare earth curve, you know, told us very, very clearly.

01:49So I hope really now with the truth in place,

01:54like to give the time, give the more cold-down emotion and the space

02:01for both governments to really engage and step back, say, you know,

02:07where we want to resolve some differences, okay, some are maybe non-standing,

02:11but where we should continue cooperation, like trade or investment or technology, right?

02:19Because it's essential for each country's own economic possibility

02:24and also, you know, given the sheer size and the scale of both the U.S. and China,

02:29so the actions they take against each other will have global ramifications, you know,

02:36so they need to be also mindful of their global responsibility to be sensible, to be reasonable, right?

02:44So that's kind of my hope.

02:46What about from the side of Beijing?

02:47Because, of course, as I just said, that big bargaining chip,

02:50but their main point of leverage is the rare earth controls,

02:52and those effectively remain in place.

02:55It's something that has caused a lot of issues with other potential or other trading partners,

03:01like in Europe, for instance.

03:02Do you think that that's the right move to keep those restrictions,

03:05or does China also risk being labelled essentially what it's saying of the U.S.,

03:09that they're an unreliable trading partner?

03:12No, I don't think it's China's intention to have worldwide control over real earth,

03:17given that China's central role, but also, you know, the central role of real earth in the global economy, right?

03:25I think it's more like a messaging, okay, because, you know, over the years,

03:29particularly led by Washington, but also Europeans willingly participate in this whole technology blockade against China,

03:37particularly with the high-end semiconductors, not only the semiconductors per se,

03:41but also the equipment making semiconductors, which is obviously ASML, right?

03:45So Europeans have been cooperating with Washington in this blockade.

03:50So China, you know, basically say, enough is enough.

03:53We have, guess what?

03:54We have some leverage, too, right?

03:56You know, real earth is one of them.

03:58So it's more like just in the wake of the summit,

04:01and China wants to send a message, okay, to all parties involved.

04:05So now, with the truth, which is between Washington and Beijing,

04:09I don't think, you know, any issue standing in the way between Brussels and Beijing.

04:13I believe it's not intended, you know, to, you know, harm European multinationals, businesses,

04:21and also obviously Australia and New Zealand.

04:23You know, that's not the issue.

04:24I think it's more, I was hoping it's more about the US and China.

04:28So, and hopefully now they realize each other are still,

04:32at the end of the day, you know, divorce is where Macy costs the outcome.

04:39Let's find a way to live together, to do trade with each other.

04:43How do you think China's economy is holding up in this environment as well?

04:47What's your perspective on what we're seeing in terms of the economic data?

04:52Well, in light of this, you know, escalation of trade war

04:56and also technology financial war, you know, mounting uncertainty facing Chinese businesses,

05:05investors, and even average consumer.

05:08Actually, Chinese economy has been holding up surprisingly well.

05:13You know, actually still quite resilient, right, against all of us.

05:17So this, again, just due to the fact that Chinese economy is not a small economy,

05:21it's very big, very diverse, and also over the years, you know,

05:26the whole economy can be more resilient, right?

05:28So that's reassuring.

05:30But, you know, the key for China to be able to sustainable in its economic growth

05:35is getting domestic act together, you know, particularly, you know,

05:41domestic demand, you know, private consumption, China needs to get the right, right?

05:46And then obviously continue innovation.

05:49So with the very strong, robust consumer demand,

05:53and with the continued strength in innovation,

05:56Chinese economy will do very well, not only in the short term,

06:00but also in the middle and long term.

06:01You're really on the messages of the fourth planet

06:03because they were the two big takeaways, lifting consumerism

06:06and then also pushing that self-reliance or self-resiliency in the tech sector.

06:10On those opportunities that we see in tech in particular,

06:13which sectors are you most interested in in China today?

06:18Well, you know, so China is not just the one pulling trigger.

06:22It's like the US, China generally, you know,

06:24has become a major global innovator across the spectrum.

06:29AI, that's what all we are focused on.

06:32So China is an upcoming strong leader with tremendous potential.

06:38Climate tech, you know, energy transition,

06:41so China, again, is a global leader in renewables, EV, batteries,

06:45and, you know, next-gen energy infrastructure.

06:49Then third is automation and robotics, you know, again,

06:54so a lot of exciting, really, really, I just,

06:57I was just in Shenzhen, Guangzhou over the weekend,

07:01and I've made a couple of funders,

07:03and they are doing really cool innovations, you know, in robotics.

07:08So, I think these are three areas, but, you know,

07:11by no means are things are confined to these areas,

07:13but these are obvious, you know, areas China actually needs,

07:21but also there's a lot of momentum,

07:22and there's a lot of really high-quality companies.

07:27Thinking more broadly, a bit about momentum,

07:30the momentum has been very strong into AI across the board,

07:33but you're at the point where we've been, of course,

07:34talking about the risk of an AI bubble now for weeks,

07:38if not longer, months.

07:39But do you see that risk of an AI bubble,

07:41and what would it be to cause that bubble to burst,

07:45or do you see sort of a slow deflation instead?

07:48I think, you know, it's understandable, right?

07:50We all are so excited about the AI,

07:52you know, the promise, you know, the breakthroughs,

07:55and the, you know, the potential application

07:57across the wide source of the economy and the society.

08:01But we also, you know, have to learn from history.

08:05Just because this is, you know,

08:07foundational new technology breakthrough,

08:10doesn't mean every trade will go into the sky, right?

08:13So, you know, it's clearly right now,

08:16there's just so much capital, you know,

08:18blindly chasing AI opportunity,

08:22and the valuation, in some cases, really decent high.

08:25So we have to be somewhat co-headed, right?

08:29So, you know, we have to remind ourselves

08:32the last dot-com bubble, yes,

08:35internet, you know, is a real revolution,

08:38but many dot-com companies actually went bust.

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