Matthews Asia sees misconceptions on Chinese growth

Matthews Asia says in its latest White Paper that it sees lingering misconceptions around Chinese growth, debt levels and ongoing economic reforms.

The paper, titled China- Separating Fact from Fiction, puts forward the view that rather than being in a deeper slowdown and serious credit crunch, China is being lead through a measured series of changes, that will rebalance the economy.

Among the key conclusions include:

– China is currently undergoing a measured slowdown and is beginning to implement policy decisions that will support a new phase of growth.

– China’s economy is becoming increasingly centered on urbanization, rising education levels, higher productivity and delivery of new services. These are attuned to the complex needs of sophisticated urban consumers.

– While there are some concerns over the pace of credit growth in China, particularly at a local government level, the absolute level of debt in China remains manageable and the government has started to introduce tightening measures.

– While not without risks, a closed and self-funding banking sector in China makes it less vulnerable to financial stress and the ability exists for the central government to intervene if necessary.

– Recently announced policy reforms, while ambitious, are encouraging and provide an indication of the level of commitment being made to improve the overall quality of growth in China’s economy.

Robert Horrocks, CIO, said: “Given the remarkable transformation of the Chinese economy over the past three decades, we see the decision by the Chinese government to rebalance the economy as a very necessary step. However, a combination of slower growth, rising debt concerns and liquidity issues in the banking sector contributed to rather negative sentiment towards the country in 2013. We, therefore, felt this was an opportune time to take a deeper look at the Chinese economy and address some of the concerns that have been raised over the past year or so.”

“From our analysis, we see the Chinese economy as strong enough to withstand many of the headwinds it now faces and more than capable of moving along a sustainable path of moderate economic growth supported by step-by-step reforms. In addition, while much attention has been placed on China’s macroeconomic outlook, it’s easy to forget that at a corporate level there are many healthy companies successfully navigating their growth path at a micro-level. With this in mind, despite the country undergoing an important economic transition, we see no reason to believe that it will not remain one of the key investment themes over the coming year.”


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