China Opportunities

The Chinese government has shown commitment to facilitate the economy’s transition from investment to consumption, and from manufacturing to services. In recent years President Xi Jinping has announced various reforms to support the private sector including tax reductions and subsidies. 

China’s economy used to be driven by high fixed asset investment (FAI), expansionary fiscal and monetary policies, and growing debt. Return on investment for FAI was low, therefore high GDP growth did not translate into high earnings growth. The government is now placing much higher emphasis on the quality of growth, shifting emphasis towards consumption and services, and away from net exports and FAI. 

A major element of the 14th Five-Year Plan (2021-2025) is an ambitious long term plan to become a leading innovative country. The government is focussing on achieving major breakthroughs in core technologies including semiconductors, cloud computing and artificial intelligence. Backing this is a pledge to boost R&D spending by more than 7% every year. 

Following major global index providers' decisions to increase the representation of Chinese assets in their indices, foreign inflows into China have increased. We believe that with growing interest from international investors, accountability and transparency in China’s capital markets are expected to improve.

In September 2020, President Xi Jinping announced his target for China to achieve peak carbon emissions by 2030 and carbon neutrality before 2060. The People’s Bank of China (PBoC) has stated that government funding alone will not be enough to reach these targets and the private sector will also have to mobilize funds into green investment. China is in the midst of a rapid scale up of renewable energy capacity that is unparalleled globally. We expect investment opportunities like these that are aligned with China’s energy transition objectives to continue to grow.