I don’t think this is true. There are three main reasons why China is a long-term investment risk.
-
China is growing old quickly. It is where Japan was before its “Lost Decade” and is in far worse (IMO) economic shape than Japan was. Cheap labor that allowed cheap manufacturing has long driven the Chinese economy. India now has cheaper and just as educated labor as China.
-
China lacks the financial and judicial infrastructure for a stable and mature economy. Its banking system makes loans based on government objectives rather than for economic reasons. Not surprising that China has a domestic debt crisis. Its judicial system acts arbitrarily and is unpredictable. Xi decides to crack down on corruption and suddenly entrepreneurs disappear. That’s not a favorable environment for business.
-
Chinese culture is not conducive to innovation. The Chinese can innovate, they are quite good at it when in the West. But Chinese society stifles innovation. It has traditionally favored stability over change, and this tendency has if anything been exacerbated by the Communist revolution. China is rigged to favor state-owned companies and those favored by the Party. There is little respect for intellectual property and therefore no incentive for individuals to innovate.
China has demonstrated that when it had favorable demographics, it could manufacture stuff cheaper than others. The demographics are no longer favorable for that. With the notable exception of batteries it has yet to demonstrate that it can consistently make things better than its competitors or create new technologies that change the market.
This was written way back in 2014, but I think it is even more relevant now than 10 years ago with the concentration of power by Xi:
“The problem, we think, is not the innovative or intellectual capacity of the Chinese people, which is boundless, but the political world in which their schools, universities, and businesses need to operate, which is very much bounded.” Why China Can’t Innovate
Over the medium-term India seems like a much better investment bet than China.