Nobody seems to care about China these days. The country is un-investable for “outsiders”. It is human nature. Most people only get interested when prices are rocking. It is easy for anyone to damn China on almost anything and the sensational media and Wall Street love it.
Looking at things from 35,000 feet, long-term changes are underway that will take time to mature and benefit the country economically. Painful as it is in terms of short-term prices, it is exactly what China needs. The Chinese looks at life through a different lens than others especially in the US where some people often choose to see the world through one lens – what a pity.
If you are curious, China is a long-term play if you know where to find the gems. I maintain an optimistic outlook regarding China’s ability to navigate its economic transition in the long-term. While near-term obstacles abound, the pervasive pessimism surrounding the Chinese economy and markets appears to be exaggerated.
While checking for regular updates, I came across a well-balanced article on China by the team at ING Group in my inbox recently.
Here is a section:
China’s economy has reached an important crossroads after undergoing one of the most impressive growth miracles of modern history. In rapidly moving financial markets, participants are understandably focused on short-term trends and developments. But it’s crucial to sometimes take a step back and look at a longer time horizon when it comes to formulating a big-picture strategy, not least in terms of asset allocation.
The short-term challenges facing China are well-documented and are discussed extensively; the real estate sector, weak confidence, and local government debt are the three major issues that usually first come to mind. These are serious concerns for the shorter-term outlook and markets often judge policy by whether there is tangible progress on these fronts.
But we think the market has settled into a state of excessive pessimism. And that’s understandable given the numerous doom and gloom media articles on firms reducing their China market exposure or exiting altogether. However, it is important to look at how the economy arrived at the situation today and what needs to be done in the long term to ensure sustained growth.
A significant part of the policy focus is on ensuring the economy transitions in a direction which will allow for sustained long-term development. Chinese markets have been discussing the development of “new productive forces”, coined by President Xi as a guiding theme for this economic transition.