Sovereign wealth fund GIC has benefited from being an early and steady investor in China and stays committed despite various risks, said chief executive Lim Chow Kiat.
Mr Lim noted that its experience in China over the years has also allowed the firm to learn valuable lessons and build "many strong partnerships".
But he added that a long-term orientation did not mean blind faith or a rigid position.
"There are challenges and risks which could knock us off this expected trajectory," he told a GIC Insights Forum in Beijing to mark the the 20th anniversary of the firm's first China office. "Hence, it is important to examine the issues closely and from different perspectives."
Mr Lim said 40 years after China began its economic reform and opened up to the world, there are still significant challenges, including the credit excesses built up since the global financial crisis and the potential property market bubble. While progress has been made, key problems remain, especially in ensuring that growth is not derailed, he added.
Trade and strategic conflicts with the United States seem to be worsening too. "The issues appear to have moved beyond short-term political posturing and into long-term geopolitical competition," said Mr Lim.
"This complicates internal economy management. But this may also provide additional impetus for deepening reforms."
Other key challenges highlighted during a panel discussion included the rebalancing of growth drivers away from external-led demand towards domestic-led ones, a tilt from investment towards domestic consumption, improving corporate governance as well as controlling pollution and reducing poverty.
GIC's approach has been to stay invested in China through the cycles to benefit from the compounding effects on its investments and to have a better chance at identifying top firms. "We don't have a crystal ball to know what Shanghai Composite will do tomorrow or next year," said Mr Lim, whose speech at last week's closed-door event was released yesterday.
"What we do know is China leaders have met all sorts of challenges before. And each time, they have faced up to them, analysed them carefully, and found ways to deal with them." As a result, "over a long period of time, a basket of the top companies in China would be worth significantly more than what they are worth today".
China's transition to a "new era" of economic development is seen driving growth in many sectors like consumer goods, healthcare, education, financial services and technology.
A globally connected Chinese market will be a powerful funding source to take growth to the next level, he said, even as China exports more capital to the world. Its innovation and technology space is also evolving fast.
Tech disruption has been an area of focus for GIC for some years now. "We have found traditional companies with such capabilities but trading at 'old economy' valuations. They are good investments and we want to keep looking for more of them," Mr Lim said.
In 1998, GIC set up its office in Beijing, having invested in the mainland for a number of years and seeing opportunities arising from the Asian financial crisis. In 2007, it opened a second China office, in Shanghai. China accounted for 19 per cent of GIC's Asia ex-Japan portfolio as at March 31 this year.
"We expect over time to see China featuring more in global investment portfolios, as more of its markets open," Mr Lim said, noting as an example that China's bond market has less than 2 per cent of foreign participation versus about 30 per cent in the US.
He said many of GIC's portfolio holdings are directly affected by what happens in China, which accounts for about a third of the world's gross domestic product growth.
