China’s growth may have declined in recent years. but the country still has much to offer investors, says Jean Médecin, a member of Carmignac Gestion's investment committee…
Since the credit and infrastructure spending fuelled recovery of 2009/2010, China's growth has gradually declined.
China suffers from an unbalanced economy with too high investment and too little consumption. But China still has much to offer for investors. While investment contribution to the economic growth has declined over the past three years, consumption contribution has been usefully resilient. This consumption will be helped in the years ahead by increasing urbanization of the population and household income growth which will boost sectors such as leisure and consumer goods. And this is where we find the most interesting investment opportunities. We maintain strong positions in companies exposed to the Chinese consumption theme such as Macau gaming companies (e.g. Las Vegas Sands) or companies benefiting from emerging market and local consumer demand such as Yum! brands which operates a rapidly expanding fast food chain.
The new Chinese leadership knows what needs to be tackled, including pollution and corruption. Investors dismayed by the lack of reforms announced so far should remember that it is not unusual for new leaders to take their time before enacting new policies. It is a good sign that the authorities have resisted the temptation to respond to the economic slowdown by splashing out on credit financed projects with limited economic return: this is encouraging – it indicates that China is serious about tackling imbalances in the economy.