Is China Investable?

The three primary concerns investors have had about China for most of 2023 are:

  • Companies pulling out of China to "de-risk" their supply chains, which may act as a drag on long-term growth and innovation and result in increasing isolation.
  • After years of disappointing growth tied to COVID lockdowns, China's government may not have been aggressive enough in implementing stimulus after reopening this year to offset the drag from collapsing property developers, lengthening the outlook for below target economic growth.
  • China's strategic confrontation with the U.S. could veer from economic competition into actual conflict.

As a result, China's stocks have been among the world’s worst performers in 2023, with a year-to-date loss of 9% for the MSCI China Index. That could change in 2024.

Better November

Chinese stocks have perked up in November, making modest gains off the October low for the year in the MSCI China Index, after three important developments helped ease the worries among investors:

  • First, shortly after shuttering its Jeep plant in the country, Stellantis announced in a press release a $1.1 billion deal for a stake in China's Leapmotor. This was one of two recent deals between legacy auto giants and Chinese electric vehicle companies that may be prompting investors to reconsider the investment prospects for China's businesses.
  • Second, the announcement of a new major fiscal stimulus package in late October has, after months of smaller tweaks to policy, signaled a more pro-growth policy stance by China's government.
  • Third, U.S. President Biden met Chinese leader Xi on November 15, after a summer of meetings among high level officials, indicating the downward spiral in U.S.-China relations is at least on hold.