“This isn’t the shoot-the-lights-out growth that drove the old China narrative, but rather a normalization to okay-but-more-sustainable growth that has been supported by balanced policies and the unwinding of past excesses. The markets have only slowly embraced this next chapter—suggesting a possible entry point for investors to consider who are willing to bypass the consensus,” said BlackRock.
Ongoing reforms, notably from the supply side, could further support Chinese economic growth. Reforms have bolstered industrial profitability and strengthened commodity prices. China’s exporters are also enjoying improvements from a rebound in global trade.
The Chinese economy is also shifting towards domestic-oriented consumption as a main growth driver. Consequently, consumption-driven sectors like technology and services are becoming a growing component in the economy.
“Patience may be required. China’s equity markets have historically been closed and loosely regulated. That has been gradually changing, with the opening of markets through Shanghai-Hong Kong Stock Connect and other programs. And more recently, MSCI announced the partial inclusion of China A-shares (listed on Shanghai and Shenzhen Exchanges) in the MSCI Emerging Market Index and other global indexes (effective in summer 2018),” adds BlackRock.
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