Martin Sorrell, of S4 Capital, says “Ignore China at your peril”

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

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

Beijing has cracked down on several companies this year, leading to strong sales of Chinese stocks. Regulators are specifically limited to areas such as gambling and data exchange.

China’s latest actions have posed “major problems” for S4 Capital, a Sorrell digital advertising and marketing company it founded in 2018, and for other companies looking to expand into China.

Sorrell said S4 Capital will continue to try to expand into China, but said the company “will have to think very carefully” about how it does it.

“We doubled down in China earlier this year when we bought another agency in Shanghai for our family,” Sorrell said. “We intend to continue to expand our business, but I think the structures we deploy in China could end up being very different as a result of this rupture in US-China relations.”

The advertising guru stopped saying how the structures of S4 Capital will be modified apart from the fact that they will be very different from the Chinese structures of WPP, another London-based advertising company he founded in 1971.

Sorrell said he hoped the U.S. and China could find a “modus vivendi that works” and have a “more constructive dialogue,” but added that he cannot see the situation changing in the short to medium term. Modus vivendi is a Latin phrase meaning “way of life” or “way of life.”

“Our industry is not strategically as important as others in a Chinese context, but it raises our customers’ problem of how they expand at the same time. [when] “The Chinese economy is changing,” Sorrell said. “With that in mind, we are looking very carefully at how and what we do in China.”

Sorrell said the Chinese government’s actions on privacy, data, education and gaming should come as no surprise, as China made it clear in its 45-year plan that it had concerns.

Last week, billionaire George Soros criticized Blackrock, the world’s largest asset manager, for its investments in China.

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

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

It came shortly after BlackRock launched a set of mutual funds and other investment products for Chinese consumers. The initiative meant that BlackRock became the first foreign-owned company to operate a wholly-owned company in China’s mutual fund industry.

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

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

“Total trade in goods and services between the two countries topped $ 600 billion by 2020. Through our investment activity, U.S.-based asset managers and other financial institutions contribute to the economic interconnection of the two. largest economies in the world “.

– CNBC’s Sam Meredith contributed to this article.