Market Update

China is embarking on a new stage of growth

January 29, 2021
Jeff Feng
Jeff Feng
Vice President and Portfolio Manager
China is embarking on a new stage of growth
Key takeaways
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China’s growth story isn’t over — in fact, there is the potential for strong, better-quality growth in the short, medium, and long term
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Interior provinces are developing infrastructure and striving to catch up with first-world standards in Beijing, Shanghai, and Shenzhen
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The vast labor force is becoming even more productive thanks to robotics, automation, education, and training

China is entering its fifth decade after the first reforms of the Deng Xiaoping era, and the conventional view among global investors, even emerging markets specialists, is that the economy is mature and growth avenues are mostly exhausted.

The argument is that “miraculous” growth (to borrow former US Treasury Secretary Lawrence Summers’ term), driven by a favorable demographic engine and creditfueled investment in housing and infrastructure construction, is unsustainable and even has to be “paid back” with depressed growth levels going forward.

While there are elements of truth to this perspective, it is too simplistic and can lead investors to miss important long-term opportunities. A holistic view shows that robust, higher-quality future growth may be achieved through a better balance between trade, domestic consumption, and investment.

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