Following unexpectedly aggressive regulatory moves earlier this year, including a decision to force multibillion-dollar after-school tutoring firms to become non-profit companies, some observers have asked whether China remains an investible market.
Mr. Sipahimalani said China remains Temasek's top investment destination, accounting for a leading 27% share of the Singapore government-owned investment company's S$381 billion ($282.7 billion) portfolio as of the March 31 close of its latest fiscal year.
However, he did concede that this year's wave of regulatory shifts had prompted Temasek's investment team to narrow its focus for now to sectors clearly in line with Beijing's policy goals.
Mr. Sipahimalani insisted that the policy aims of China's regulatory moves — which hit technology and internet giants such as Alibaba Group Holdings Ltd. and Tencent Group Holding Ltd. particularly hard — were largely in line with goals being pursued by regulators around the globe: to curb the power of tech giants, to secure data privacy and to alleviate income inequality.
The difference, noted the chief investment strategist: "The way the Chinese government acted on these issues was seen as very blunt," raising doubts in some circles as to whether Beijing remained committed to a market economy or instead whether everything was just going to be policy directed.
Mr. Sipahimalani said the highest echelons of China's government quickly made it clear that policy would continue to support the growth of a private sector, which accounts for 80% of employment in China and 60% of the country's GDP.
He predicted that in line with other recent moments of significant regulatory change, in 2015 and 2018, when mistakes are made "there are self-correcting mechanisms ... but it takes a few months, so I don't expect this to be happening overnight."
As a result, "in the areas that are directly in the crosshairs of these policy issues, we're more cautious right now and would wait for things to get sorted out over the next few months before being more aggressive to invest there," Mr. Sipahimalani said.
On the other hand, there continue to be big areas in the Chinese economy perfectly aligned with government policy, including biotechnology, medical technology, health-care services or renewable energy and electrical vehicles, and Temasek has continued to invest there, he said.