THIS MATERIAL IS A MARKETING COMMUNICATION.
A Paradigm Shift: Capture Opportunities in the New Chinese Economy
China’s economic foundations are shifting, and so are its investment opportunities. In this paper, we will take an in-depth look into the changes taking place in its US$13.4 trillion1 economy, exploring the underlying factors that are driving them and where they may lead the country in the future. Through it all, we will study the opportunities being created and how investors can benefit.
China’s Macro Shift: Towards a Self-Sustaining Giant
For the past 40 years, China’s economy has developed at an unprecedented rate. Since its government implemented economic reforms in 1979, significantly freeing up markets, the country has seen real annual GDP growth average 9.5%1. The World Bank has described this dramatic evolution as: “The fastest sustained expansion by a major economy in history”2. The result of this growth is clear – its US$13.4 trillion economy is now the world’s second largest1.
For most of those 40 years, however, this enlargement was mostly attributed to large-scale capital investment, financed from both international sources and substantial domestic savings. Another contributing factor was the rapid productivity increase brought about by market liberalisation, exposure to competition, and the import of efficiency-boosting technologies and processes via foreign direct investment (FDI).
The historical drivers that have contributed to China’s economic growth have diminished. In other words, China’s growth story has changed.
The Rise of Domestic Private Consumption
As China’s economic drivers have evolved, international trade and investment have taken a back seat, and private consumption is now behind the wheel. Since 2013, it has surpassed the others to become the main force of growth. Data3 shows that private consumption accounted for at least 60% of GDP growth in 11 out of the 16 quarters since 2015. For the 2017-2018 period, this figure rose to 76%, and in the first half of 2018, its share increased further to 80%. Meanwhile, China’s net trade surplus keeps falling, from an estimated 8% in 2008 to 1.3% in 2018 – less than South Korea or Germany. In fact, net trade made a negative
contribution to GDP for the 2017–2018 period.
Furthermore, as private consumption snaps up an everyhigher share of the Chinese economy, China’s international relationship dynamics have also altered – China is reducing its exposure to the world.
Indeed, the data reveals that China is becoming increasingly insular. McKinsey’s China-World Exposure Index measures the relative exposure between China and the rest of the world on three fronts – trade, technology, and capital. From 2000 to 2017, the index value representing China’s global exposure declined from 0.8 to 0.6. However, for the opposite scenario, it increased from 0.4 to 1.2 over the same period.
1 Congressional Research Service, as of June 25, 2019.
2 The World Bank, as of Apr 08, 2019.
3 McKinsey & Company, as of Jul 31, 2019.
November 06, 2019
Staying Ahead with Mirae Asset’s Latest Insights
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature/ . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary/.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2023. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.