In 2023, Chinese markets have been roiled by continued trade tensions, slowing economic growth, and deleveraging in the property sector. Despite this difficult backdrop, there are reasons to be optimistic about the growth prospects of some Chinese companies. Portfolio Managers Andrew West, CFA, and Lee Gao discuss their current perspectives on China with Portfolio Specialist Apurva Schwartz, including how they weigh the opportunities and risks of investing in the market.
Slowdown in Economic Growth
Real estate, the biggest source of wealth for Chinese consumers, was in bubble territory and has been slowing for a while. This has negatively affected consumer confidence and household consumption.
Property Deleveraging
Two-thirds of private developers cannot service their debt. Deleveraging may continue but Beijing has plenty of policy options available to help revive growth.
Investment Rewards vs. Risk
Quality growth companies are doing well, and valuations look better now than at any point over the last 30 years, suggesting prospective returns could be high. We maintain diversified portfolios and carefully monitor risks to try and take advantage of the opportunities that we see.
Impact On Our Investments
China is a big place; different things happen in different sectors. Despite the broad market slowdown, many of our holdings, which are in globally competitive industries such as solar, electric vehicles, and industrial components, are still growing rapidly.