China: Does the narrative match reality?

China has rarely been out of the headlines over the past 12 months as the world’s second-largest economy grapples with its slowest rate of economic growth (6.6% in 2018) in 30 years.

It is timely, then, that The Lens has managed to speak to some firms recently for whom the 28% stock market loss in China last year was not merely a newspaper headline, but a reality of their business environment.

We met some of these firms at a roundtable* hosted by Funds Europe magazine, for example. There were Western investors there who shared their views on China as the country presses ahead with efforts to open its financial sector to foreign firms.

China was the worst global performer in 2018 as Beijing gets deeper into a trade war with Washington and tries to thrash out a deal before March 2, 2019.

If the sides fail to strike an agreement, the US could increase tariffs on $200 billion of Chinese imports from 10% to 25%.

So, does the doom and gloom narrative surrounding China really match up with the reality as far as asset managers the Lens knows, both in Asia and Europe?

The China watchers point out that the government has taken steps to open its financial sector and is making a concerted effort to assimilate the $40 trillion industry into the global economy. Investors too are looking at how to increase their exposure to the Middle Kingdom as it welcomes foreign investors.

Despite the slowdown, several asset managers The Lens has spoken to are still optimistic on China, for it is a long-term story, they insist.

Besides, they add, where else can you find attractive investment returns?

*The roundtable will form part of a Funds Europe China special report due to be published in April.