According to Columbia Threadneedle, Beijing can count on a fundamental opportunity for structural growth. The gross domestic product is expected to rise to over 26 thousand dollars in 2023. There will be interesting opportunities for investors.
China has already become the single largest consumer market in the world. Annual sales of new cars in China reach 28 million units, while in the United States are around 17 million. Chinese consumers buy more iPhones than US ones (it should be noted that, according to research firm Idc, deliveries decreased by 19.9% in the fourth quarter of 2018). Many Chinese companies are developing better quality products and innovative business models to leverage growth.
"Despite the uncertainty, China can count on a fundamental opportunity for structural growth, which is domestic consumption," emphasizes Jin Xu, Asian equity portfolio manager for Columbia Threadneedle. The manager puts the numbers in a row. According to the International Monetary Fund, the per capita in China in 2017 was approximately $ 9,000. In the same year it amounted to approximately 40 thousand dollars in the UK and around 60 thousand in the US.
"Over the next decade, the impact of domestic consumption in China should continue to grow steadily. It is unlikely to regress. The Chinese GDP with equal purchasing power in 2017 amounted to almost 17 thousand dollars. According to the estimates, it should rise to over 26 thousand dollars by 2023. This progression represents an opportunity for us ", says Jin Xu.
"In our Asian and Chinese portfolios, we have managed to incorporate these issues, ranging from technology to insurance and consumer sectors. Whether it's the rise of e-commerce, the increase in demand for life insurance policies as the population grows in wealth or the demand for high-end luxury goods, in our capacity as active managers with a deep knowledge of the local situation, we are aware that this structural trend will continue to create interesting investment opportunities ", the manager continues in his analysis.
In the background there are the trade tensions with the United States. "It will take some time to come up with a solution, but we believe that the situation will not worsen significantly compared to the status quo".
"China is taking seriously the demand for a change in the corporate world coming from the United States", he added. The recent willingness to open up its foreign market "is an example". Jin Xu mentions the case of Testa, about to start the construction of a plant in Shanghai of which he will own 100% and the case of UBS, which has obtained the approval to the acquisition of the majority (51%) in a local joint venture dealing with real estate brokerage. It is also the right time for Chinese companies, increasingly involved in the development of more innovative products, therefore interested in greater protection of intellectual property in the internal market. In short, less than a year has passed since the beginning of the commercial war, but China is already making progress".
The changes taking place may also affect the way companies are facing the slow down. "This time support policies are progressive. They take inspiration from a mentality that relies on data rather than on a massive incentive which ends up causing spare capacity " concludes the manager. " Presumably the recovery will not have the same trend recently experienced, when all the economy sectors have rebounded strongly, but it will be more sustainable, partly due to the new quality-oriented support policy.
(Source:Class Editori)
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