Former Cisco CEO warns against investing in China

didi chuxing

Former long-time Cisco CEO John Chambers has done business in China for decades, dealing with corporate leaders and government officials.

The various dealings were always tough, acknowledges Chambers, but importantly there was a certain predictability to them and a focus on win-win outcomes.

But that predictability has evaporated as the Chinese government cracks down on the business operations of Didi (DIDI) and other big tech players in the country, says Chambers.

As a result of this new unpredictability from Chinese officials, Chambers is suggesting to the leaders of the portfolio of upstart tech companies he oversees as founder and CEO of venture capital firm JC2 Ventures to be more cautious when doing business in the country.

“I think they [China] overreached in terms of the most recent technology moves they made in hampering their tech startups,” Chambers said on Yahoo Finance Live.

“Will they be the largest economy in the world inevitably? Yes. Will the U.S. and China eventually figure out how to get along? Yes. Do I think it will be bumpy? Yes. And will I be investing in China at the present time, especially as a small company that has technology leadership? I would not.”

The harder line on China tech companies has pummeled investors in some of the most well-known names.

Shares of Tencent have plunged 32% over the last six months, Alibaba (BABA) is down 35% and Didi has crashed nearly 50%. (JD) shares have performed the best on a relative basis, but are still down 22%.

The Invesco Golden Dragon China ETF (PGJ) — which holds investments in top China names such as Nio (NIO) and Alibaba — has shed an astounding 55% in the past six months.

The situation may be poised to get even bumpier, too.

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler told Bloomberg on Tuesday the “clock is ticking” on delisting Chinese companies.

“I think they [China] have to get back to that [being more predictable]. I don’t think it’s in their country’s best interest long-term or ours. Both sides are to blame there,” Chambers added.