It’s been four years since my last visit to China. During these years, from what’s reported and feedback, it seemed China’s economy had taken a huge blow and people were generally downbeat. The property sector is badly impacted, foreign investors are pulling out and government financials are tight. So in my latest business trip, I went about to verify on the ground. My first night in Shanghai gave an indication. I was in Nanfeng City mall to grab dinner. The restaurants were mostly empty, maybe because it was a weekday. In the subsequent days, I spoke to bankers, friends and observed the surroundings. One of them told me the unofficial Shanghai population number had decreased from 11m to 9m. Many businesses had folded over the Covid period. Previously, the local government had pushed out low value manufacturing in order to focus on better quality sectors such as AI and banking. But with business owners relocating overseas, that had caused more damage than intended. Jobs were lost, wages stagnated and that’s affected domestic consumption. The banks are willing to lend but there are no takers. As a result, tax revenues dropped and government payments got delayed. So it’s become a vicious cycle that saps confidence. Worse, the BRI strategy had seen countries defaulting on debts and now appeared fragile with uncompleted projects mounting. Funds are urgently required yet the RMB is being weakened. Within the CCP, the military and appointed minister are being revamped to weed out corruption. The confluence of many factors have projected a certain idea of a weakened China. At the moment, nobody expects things to get better this year.
My opinion is China would require a monumental effort. Fortunately, they have the resources and structure to make quick changes. This might take a few years so I won't be in a hurry to make a bet. Therefore, it's better to play a safe card by putting funds in government bonds, the bluest chips or Etfs with non China focus.
Tip: Cloudy Bay Te Wahi Pinot Noir 2019, remarkable floral nose with good balance, a winemaker's pride
No comments:
Post a Comment