The chairman of Australia's A$243.5 billion ($164 billion) sovereign wealth fund says he's increasingly wary of being caught in the crosshairs of U.S.-China tensions and the potential for the Biden administration to place investment bans on Chinese companies.
Peter Costello said he could "easily see" such bans being introduced, which could lead to the Future Fund having to write down its Chinese assets as it did with Russian investments in the wake of sanctions.
"What worries us is that as this decoupling goes on, the U.S. Commerce Department under the Bureau of Industry and Security is announcing various Chinese companies that you can't export high-tech equipment to," Mr. Costello told the Australian Financial Review Business Summit in Sydney on Tuesday.
"I can very easily see investment bans being introduced," Mr. Costello said. "You might find yourself stuck in a whole lot of companies that suddenly get banned and in order to comply with US sanctions you have to get out."
Mr. Costello's remarks highlight the tricky path for global investors navigating geopolitical uncertainty. In November, the Future Fund's CEO Raphael Arndt told the Bloomberg New Economy Forum that warming ties between Australia and China could mean more investment opportunities. Mr. Costello said Tuesday the fund had "gone through very carefully" any companies it wanted to retain in emerging markets.
The chairman said that this time last year the Future Fund wrote down its Russian investments to zero after the invasion of Ukraine. "Is it foreseeable that something similar could happen in China? Well, I think it's foreseeable, particularly if, let me give you a scenario, a Chinese drone is found in Ukraine," he said during a panel discussion.
"I bet my bottom dollar that there will be investment bans placed on that company and any other company that's in a similar kind of industry," he said.