Investors warned to stick with China despite economic hiccups
According to the latest van Eyk Investment Outlook Report, industrial output in China expanded at 8.6% in January-February, a five-year low while retail sales grew at a relatively sluggish – by Chinese standards – 11.8%. Investment spending growth slowed to 17.9%.
Compounding these results, the March trade data was also disappointing. “Exports declined 6.6% over the year, although this may exaggerate the weakness as the base month was inflated by over-invoicing exports in attempts to disguise capital inflows this time last year,” says van Eyk.
The Yuan has also taken some recent hits and while it remains difficult to pinpoint the cause of the currency’s decline, van Eyk links it to Chinese government’s concerns that “hot” foreign capital inflows have made the job of managing the economy more challenging.
The upshot is that the outlook for the Chinese economy remains uncertain. “Attempts are being made to steer the economy away from its reliance on investment and exports, and to reign-in the housing and credit explosion while maintaining growth at levels consistent with ongoing jobs growth,” says van Eyk.
Ron Hodge, CEO of Australia’s most popular independent financial supermarket, InvestSmart, warns investors against throwing the baby out with the bathwater.
“There are some issues in China but it is still a massive and dominating economy, which investors would be sensible to consider as part of a balanced portfolio,” says Hodge.
“One of the best ways to achieve some exposure to China is by investing in managed funds that buy into a large number of Chinese and Asian companies.
“By using a managed fund, you simply pay the experts a fee and let them pick the right companies and level of exposure to China for you".
Frequently Asked Questions about this Article…
Investors are advised to stick with China because it remains a massive and dominating economy. Despite some economic hiccups, China is still a significant player in the global market, and including it in a balanced portfolio can be beneficial.
Recent economic indicators for China show that industrial output expanded at 8.6%, retail sales grew by 11.8%, and investment spending growth slowed to 17.9%. However, exports declined by 6.6% over the year, which may be exaggerated due to previous over-invoicing.
The Chinese Yuan has experienced some recent declines. While the exact cause is difficult to pinpoint, it is linked to the Chinese government's concerns about 'hot' foreign capital inflows complicating economic management.
The outlook for the Chinese economy remains uncertain. Efforts are being made to reduce reliance on investment and exports, control the housing and credit boom, and maintain growth levels that support job creation.
Ron Hodge recommends investing in managed funds that focus on Chinese and Asian companies. This approach allows investors to leverage expert knowledge to select the right companies and exposure levels, making it a sensible strategy for gaining exposure to China.
Managed funds can help investors gain exposure to China by allowing experts to select a diversified portfolio of Chinese and Asian companies. Investors pay a fee for this expertise, which can simplify the process of investing in a complex market like China.
The Chinese government is facing challenges in managing its economy due to 'hot' foreign capital inflows, which complicate economic management. Additionally, there is a need to steer the economy away from heavy reliance on investment and exports while controlling the housing and credit boom.
The March trade data for China might be misleading because the decline in exports by 6.6% could be exaggerated. This is due to the previous year's base month being inflated by over-invoicing exports to disguise capital inflows.
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