Martin Sorrell of S4 Capital says: “Ignore China at your personal danger”


Martin Sorrell, Chairman of S4 Capital, during a Bloomberg Television interview on March 18, 2019

Jason Alden | Bloomberg | Getty Images

British businessman Martin Sorrell has warned that it would be unwise for companies to completely ignore China despite the challenges in the country.

“It’s the second largest economy in the world,” Sorrell told CNBC’s Squawk Box Europe on Monday. “It will be the largest economy in the world in a few years, not per capita but in absolute terms, and you ignore it at your own risk.”

Beijing cracked down on several companies this year, resulting in a sharp sell-off in Chinese stocks. Regulators intervene particularly in areas such as gaming and data sharing.

China’s recent moves have created “significant problems” for Sorrell’s S4 Capital, a digital advertising and marketing company he founded in 2018, and other companies looking to expand in China.

Sorrell said S4 Capital will continue to seek to expand in China, but said the company “needs to think very carefully” how to do it.

“We doubled in size in China earlier this year when we added another Shanghai agency to our family,” said Sorrell. “We intend to continue expanding our business, but I think the structures we are using in China could be very different because of this gap in US-China relations.”

The advertising guru didn’t say how S4 Capital’s structures will be optimized, other than that it will be very different from the Chinese structures of WPP, another London-based advertising firm he founded in 1971.

Sorrell said he hoped the US and China could find a “modus vivendi that works” and have a “constructive dialogue” but added that he could not see any change in the situation in the short to medium term. Modus vivendi is a Latin expression that means “way of life” or “way of life”.

“Our industry is not as strategically important as others in the Chinese context, but it does raise the question for our customers of how they can expand at the same time [when] “The Chinese economy is changing,” said Sorrell. “In light of this, we are looking very carefully at how and what we are doing in China.”

Soros: BlackRock makes a “tragic mistake” in China

Billionaire George Soros last week criticized the world’s largest wealth manager Blackrock for investing in China.

In a September 7 letter in the Wall Street Journal, Soros described BlackRock’s initiative in China as a “tragic mistake” that would “harm the national security interests of the US and other democracies.”

The comment, titled “BlackRock’s China Blunder,” said the company’s decision to pour billions into the country was a “bad investment” that would likely lose money for its customers.

It came shortly after BlackRock launched a range of mutual funds and other investment products aimed at Chinese consumers. The initiative resulted in BlackRock becoming the first foreign-owned company to operate a wholly-owned company in the Chinese mutual fund industry.

BlackRock told CNBC that its Chinese mutual fund subsidiary launched its first fund in the country after raising 6.68 billion Chinese yuan ($ 1.03 billion) from more than 111,000 investors.

“The United States and China have a large and complex economic relationship,” said a BlackRock spokesman in response to Soros’ comments.

“Total trade in goods and services between the two countries exceeded $ 600 billion in 2020. Through our investment activities, US asset managers and other financial institutions contribute to the economic networking of the world’s two largest economies.”

– CNBC’s Sam Meredith contributed to this article.