"In recent months, as we assess the changing post-COVID economic environment, recent regulatory changes in China, and the continued deterioration of U.S.-China and Canada-China relations, we reduced our investment activities in China and paused further private investments," Mr. McLennan told the committee. "We will continue to responsibly manage our existing investments in the country, as well as in other countries in the region."
Daniel Garant, executive vice president and global head, public markets at the C$215 billion British Columbia Investment Management Corp., Victoria, told the committee that BCI will make a similar pause in Chinese investments.
BCI told Pensions & Investments in an emailed statement: "As a global investor, BCI recognizes the significant economic contributions of emerging markets in our world. Our current exposure in China is less than 5% of the overall BCI portfolio, the majority of which is through public markets and via indexed funds, which is necessary to offer BCI flexibility and required liquidity as part of our diversified portfolio."
Across its portfolio, BCI said it has reduced its exposure in China and Hong Kong by about 15% over the past two years, including pausing direct investments in China.
"We currently have public equity exposure to China, Hong Kong and Taiwan that reflects a broad-based emerging market public equity index," BCI added.
Michel Leduc, senior managing director and global head of public and corporate affairs at the C$536 billion Canada Pension Plan Investment Board, Toronto, told the committee that CPPIB currently has 9.8% of its assets invested in China.
"Exposing the fund to Chinese markets gives us access to one of the world's largest and fastest-growing economies in sectors such as consumer discretionary, logistics and real estate," Mr. Leduc said at the hearing. "In addition to growth from this demographic opportunity, China often moves in ways uncorrelated to developed markets, thus adding a balance to our portfolio."
Mr. Leduc also assured the committee that CPPIB is very aware of the "very significant risks" associated with investing in China. "We aim to always conduct ourselves as principled and prudent investors with a view to acting in the best interest of contributors and beneficiaries," he noted.
Mr. Leduc added that CPPIB will exit or avoid making an investment in a company that violates human rights. "We recognize that any investment in China needs to be handled with care, sophistication and an acute understanding of the current political and geopolitical environment," he said.
However, Mr. Leduc also asserted that the pension fund needs to be invested in the emerging markets, including China, for diversification purposes.
Vincent Delisle, executive vice president and head of liquid markets at the C$402 billion Caisse de depot et placement du Quebec, Montreal, told the committee that China accounted for about 2.3% of the pension fund's assets.
"We see China as a market that contributes to our diversification and to the long-term performance of our depositors, while its weight in global GDP is already close to 20%," Mr. DeLisle said.
Noting that 60% of CDPQ's Chinese exposure is in liquid assets, Mr. Delisle said should the need arise the pension fund can quickly exit out of certain Chinese securities.
