Why China?
The Chinese economy is in the midst of dramatic change and growth
- China is the largest country in the world with more than 1.3 Billion residents, equal to 20% of the global population
- Rapid urbanization to continue as China transitions from an agrarian society to an industrialized nation
The massive size and very high structural growth rate has turned China into one of the largest and most dynamic economies and financial markets in the World.
- Middle class finally emerging and becoming a large force
- Still a low income country, but aggregates are huge creating massive end markets for consumer goods
- National champion strategy has created some of the largest, most profitable companies in the world
For US observers, China’s prowess in manufacturing and exporting light industrial and low-end consumer goods is well known.
- China’s export dependence is overstated, though exports are important
- Continental economy also contributes to domestic growth; China not dependent on trade for most basic needs
- China is moving up the value chain in manufacturing, long process but some innovative companies are hiring Japanese / Korean ex-pats for their technological know-how
- China’s domestic economy still has vast infrastructure needs (interior) and consumption potential (rising disposable income and excess savings)
- Rebalancing possible because of the strength of China’s banking system, corporate sector, government finances and policy implementation and household sector
Financial reforms have helped develop a large, liquid capital market in China, opening the country up to foreign and domestic investment.
- Aggregate equity market cap. of Hong Kong / China listed shares is $5.5 Trillion or 12.5% of global market cap
- Volumes on Shanghai and Hong Kong very high
- Future reforms to unlock captive capital (A-shares vs. H-shares)