China will lead the rise of the global economy and sectors related to energy, and consumption in the country has great investment potential, a senior executive at private equity company Warburg Pincus said on Thursday.
"There will continue to be the great rise of the emerging markets," said Charles Kaye, co-president of Warburg Pincus LLC, at a forum held by AVCJ Group Ltd.
"While China and India, each with over 1 billion people, have led this rise, other countries,representing several billion more people, are joining the process."
Global GDP growth will almost certainly come from outside the developed world, with theurbanization drive in emerging markets expected to double the size of the middle class, Kayesaid.
According to Kaye, resources including energy have been a global challenge recently. Whilethe competition for new exploration ventures in the United States has been fierce, WarburgPincus is looking at other sites as well, including Asia, Canada, Europe, Latin America andAfrica.
"In China, we are quite positive on our investment in AAG (Asian American Gas Energy Inc) andthink there will be many more opportunities to bring much of what we have learned here," saidKaye.
Asian American Gas Energy, a China-based gas developer backed by Warburg Pincus, BaringPrivate Equity Asia and Chengwei Ventures, was reportedly planning at the end of last year toraise up to $200 million through a Hong Kong initial public offering. AAG engages in theexploration, development, production and marketing of coalbed methane resources.
"As the nature of China's growth shifts and new supply from unconventional plays, as well asthe oil sands and new areas of development from around the world comes on stream, thechallenges of staying balanced - and dealing with inevitable volatility and shocks - will beincreasingly important," Kaye said.
"The focus around the consumer - whether consumer products and retail or healthcare,financial services and real estate - remains at the heart of our own investment strategy inChina," he added.
Last year, Warburg Pincus exited from the Intime Department Store Group and made four newinvestments, which play to the emerging consumer sector - of which China Auto RentalHoldings Inc, China Kidswant Investment Holdings Co Ltd, an emerging maternity, infant andchildren specialty retailer, and Cubic City (China) Service Apartment Group Ltd were revealed.
According to Kaye, China's growth miracle has been remarkable, but the model of export-ledand then investment-and-infrastructure building-led growth is becoming harder to follow, andperhaps even unavailable.
The transition to domestic demand and consumption has been much talked about but it's noteasy to accomplish, he said.
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