Thoughts on China from the desk of Barry Lau

By Barry Lau, Managing Partner & CIO (Private Investments)
February 2016

With global markets taking a nose dive in recent weeks, many have argued that it has been caused by a slowdown in the Chinese economy. I thought it is important to share with you my on the ground in China perspectives.

Without a doubt, China is slowing. After 30 years of rapid growth, the economy is now in consolidation mode and we have articulated that a normal sustainable growth rate would be 5%-6% GDP p.a. during the next 5 years projected by Economic Intelligence Unit, which in itself is an enviable growth rate for our European, American and Japanese counterparts.

Over the last couple of decades, China is trying to evolve from a manufacturing led economy to a consumption driven economy, or at any rate, that is what the government wants. Manufacturing has remained stable at approximately 40% of Chinese GDP over the last 20 years. On the other hand, consumption now represents approximately 58%, compared to around 40% 20 years ago, indicating a significant economic shift according to the World Bank. Presently, it looks as if China has retained its throne as the “Global Manufacturing King”. That being said, the manufacturing value chain has evolved tremendously and remains an important component to the Chinese economy. We will discuss later how the evolution of the economy has called for a slightly different focus for the manufacturing sector.

In this article, we seek to achieve the following:

1. What we see on the ground in China

2. Future perspectives given new government led initiatives, e.g. One Belt One Road (“OBOR”)

3. How to benefit from the above

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