Unpacking China’s new economic focus
Despite changes to China’s economic direction, Australia should expect a large increase in demand from China for consumer goods and healthcare as their middle class continues to rise.
Speaking at the CFA Societies Australian Investment Conference, Jing Li, senior economist at AustralianSuper, said China had changed its economic focus from growth to economic and social fairness, self-reliance and national security, financial de-risking and environmental protection.
“We expect that these four new themes will dominate all policy moves in China, and as an investor, it is almost always important for us to be in line with China's national themes,” said Li.
She said the degree and pace of China’s crackdown on its tutoring sector and its anti-monopoly campaign had exceeded market expectations but were indications of China’s new strategies.
“So we think the best way to understand China, to understand the above puzzles, is to take one step back and think about what China really wants,” said Li.
“So domestically, it's all about social and economic stability, which can only be achieved by sustainable improvements in people's livelihood, not only from the economic side, but also [through other things] such as social equality, environmental protection.”
Li said China’s aim was to expand its global influence as a respected regional and global player through deepening its trade relationships to raise the cost for countries if they chose to go against China’s interests.
But its ageing population, declining return on capital investments, heavy debt burden and rising tensions between the United States and their allies, were constraining China’s growth and causing it to pursue new economic strategies.
According to Li, AustralianSuper expected China’s economy to gradually evolve toward a consumption driven model which would cause less demand for commodities and more geopolitical fence sitting from Chinese investors and enterprises.
And finally, it would be more difficult to buy good Chinese companies listed in overseas markets, according to Li, as the firms in line with China’s national interests would more likely be listed on Chinese exchanges.
Recommended for you
Platinum Asset Management has put its two closed-end funds under strategic review in a bid to reduce the share price discount to pre-tax NTA and maximise shareholder value.
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
