The Role of Chinese Assets
Strategic rivalry between the U.S. and China is creating a bipolar world. We believe investors need exposure to both spheres of growth to help meet their long-term goals.
01. An “undiscovered” market
China’s economy and capital markets have rapidly grown to become the second-largest in the world, yet foreign investors own only a minuscule share of Chinese stocks and bonds.1 We believe this is a missed opportunity for helping meet investors’ long-term goals.
02. Potential diversification
Investors will need deliberate diversification across countries, sectors and companies, in our view. How to gain exposure to the Chinese sphere of growth? It’s not just about Chinese assets; it’s about investing in companies, sectors and countries that are leveraged to Chinese growth.
03. A matter of balance
Both China and the U.S. are seeking self- sufficiency in the critical industries of the future. We believe investors need to balance the investment case for gaining exposure to both within their objectives and constraints, as well as with possible investment restrictions on each side.
A stronger narrative
China has emerged from the pandemic with renewed confidence – just as it did after the global financial crisis. Growth has bounced back to trend and foreign direct investment inflows are surging.2 A stable economic backdrop has made authorities more comfortable emphasizing structural reforms over short-term growth targets, in our view.
This signals greater emphasis on reducing risks in the financial sector, reliance on imported technological know- how and pursuing self-sufficiency in energy.
We believe the narrative on the health of China’s financial system has shifted markedly. Its economic and market outperformance through yet another global shock has brought sharply into focus the resilience Chinese assets can help bring to portfolios.