Charles Munger: Why I Invested In Alibaba And Other Chinese Stocks

In his latest Daily Journal Meeting, Charles Munger was asked why he investing in Alibaba and other Chinese stocks. Here’s an excerpt from the meeting with the host asking questions she received from participants:

Host: As a Daily Journal owner, do we own local shares of Alibaba? Does that actually give us legal ownership of that business or do we have a variable interest, and is that the same? Net net, what do we own? And I did get a series of questions related to that thought.

Munger: When you buy Alibaba you do get a sort of a derivative, but assuming there’s a reasonable honor among civilized nations, that risk doesn’t seem all that big to me.

Host: Got a lot of questions just about the investing in China risks and I will ask this one from Robbie Meta.

He’s interested in your take on China and Chinese stock exposure for the long-term. He says it’s becoming quite evident that Chinese companies could be banned from doing business in the western world or maybe some of the eastern countries too because of a number of the following reasons.

One, the security threat issues. Two, the potential conflict over Taiwan. Three, inability to meet western accounting standards, and number four, human rights issues. Considering all the risks mentioned above, why would anyone as smart as Munger or Buffett consider investing in China or any of the Chinese companies?

Munger: We did it for a very simple reason. We got more strength per dollar invested. In China the companies we invest in are stronger relative to their competition and priced lower. That’s why we’re in China.

You can watch the entire meeting here: