Share Name Share Symbol Market Type Share ISIN Share Description
Jpmorgan Chinese Investment Trust Plc LSE:JMC London Ordinary Share GB0003435012 ORD 25P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  7.00 2.37% 302.00 298.00 302.00 305.00 300.00 305.00 30,060 16:35:02
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 0.0 3.5 4.3 69.9 227

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Being reported that trade war between USA and China could go on for the next 10 years. What is happening in Hong Kong is more serious and important for China than their trade war with the USA.
Is It important that the 1st October is the 70th Anniversary of the Peoples Republic of China??? I know on their 100 Ann they want to have taken over from the USA as the worlds reserve currency - at least that is their goal.
Mobius - China: Concerns regarding private and public sector debt, and the slowdown in growth and increase in costs, are valid. However, we believe that China has the means to successfully manage its economic transition towards greater consumption and higher value industrial output. Recent initiatives to stimulate the economy, including the investment in logistics and infrastructure, attracting high-tech investments and facilitating R&D spending, all point towards a competent and credible policy mix to deal with the transition. It won’t happen overnight, but the Chinese are true long-term thinkers.
JP Morgan’s global equity strategists are positive on emerging markets versus developed markets this year, but are ‘neutral’; on China whereas they prefer Brazil, Chile, Russia and Indonesia. In addition the analysts say global emerging markets are cheap, trading at lower price-to-earnings ratios than in their last bear market in 2015-16.
Net asset has increased
Mark Mobius tilts towards China, South Korea and is also bullish on Brazil and Russia where consumer Discretionary goods and services benefiting from domestic consumption growth in these countries. "The opportunities are incredible for the right investment." He remains optimistic in the emerging markets of Vietnam, China and India and believes we're going to see lot's of opportunities in these markets down the road especially India has got tremendous opportunities. Mobius also small- and mid-size mainland Chinese companies public in Hong Kong. Fintech is a focus area, as is firms that assist traditional corporations to better deploy internet technologies. "That's where the growth opportunities are," he said. "China is now a huge market, and it's growing because we are now getting more and more access," he said. “With the A-share market coming into the availability of foreign investors, the opportunities are incredible”. He also says he expects a 30% correction in the US market as a result of massive out flows from ETF's. Currently global ETF stock assets stand at $4.7 trillion.
As Emerging Markets Sell Off, the Biggest One's Doing Fine by Richard Frost and Tian Chen: Within a chorus of warnings about the threats facing emerging markets, little is being said about the largest of them all. And with everything else that’s going on, why would you worry about China? Stocks are up this month in Shanghai, the yuan is at a two-year high against a basket of peers, and bonds are about as prized relative to Treasuries as they’ve been since 2016. A similar picture exists outside of financial assets, with the economy growing at a steady clip and domestic demand supporting imports -- including from emerging peers. That’s the sort of stability that’s been hard to come by in some developing markets, where even superfan Mark Mobius sees more pain to come. Yet the country isn’t immune to what’s afflicting investors from Buenos Aires to Ankara. The People’s Bank of China has been following the Federal Reserve (albeit at a slower pace) with higher interest rates; a deleveraging campaign is another form of tightening that risks slower growth and more corporate defaults; and an unpredictable trade war with the U.S. poses a threat to exports and economic confidence. “China’s financial markets are enjoying support from strong fundamentals and they are not that sensitive to global volatility," said Shen Jianguang, chief Asia economist at Mizuho Securities in Hong Kong. “The biggest latent risk to the markets is the trade war, which I don’t think is going to be simple to resolve."
Hermes - China a deep rich market,a great place to be long term over the next 20 years. Chinese government most probably the most solvent government in the world and Chinese banks are all deposit backed. Russia, Brazil and Peru good to be in at the moment because of where we are in the commodity cycle. These markets will go up and down more than the average market because they are more emotional markets. Sberbank is growing and adding value and wealth. India - got some good companies, however has serious structural problems and bureaucracy.
Great expectations by Marina Gerner: So what is the outlook for the BRICS? Stammers says that, ultimately, China and India are looking to become leading global providers of goods and services, so they make things. In contrast, Russia and Brazil are expected to become the global giants in commodities, so they provide the basic raw materials needed to make those things. Paul McNamara, an investment director and lead manager on emerging market bond, currency and hedge fund strategies at GAM, says: ‘China and India matter a lot; the other two are secondary.’ All the BRICS countries face different obstacles. ‘Russia is crippled by dysfunctional institutions and corruption, but Brazil is slightly better off,’ comments McNamara. Redwood says Russia has ‘suffered a setback from the lower oil price, which has hit its export earnings and tax revenues, and from Western actions, which have made some trade and transactions more difficult’. Redwood observes that Brazil has been through a bad political and economic crisis, with recession, high inflation and difficult corruption problems forcing changes of government. He says: ‘There is now some hope of recovery, but there remain deep-seated economic and political problems to resolve fully.’ South Africa too has been suffering from political instability and failing economic policies. ‘Future sustained progress in both Brazil and South Africa will need stable reform-oriented governments that can shake off the problems of the past,’ he adds. India has become the poster child for reform-led recovery in emerging markets, argues James Penny, senior investment manager at TAM Asset Management. ‘With the appointment of prime minster Modi, the country has been put on a path of steep and deep economic and government reform to bring its economy and vast middle-class population to the forefront in the modern market.’ ‘India has scope to become one of the world’s largest economies, but it still has a lot further to go to increase incomes per head.’ Moreover, South Africa, Russia and to some extent Brazil rely on mining and the production of oil and commodities, whereas China and India are more dependent on imports of raw materials. Dominant China: However, Penny says the biggest and, on the global stage, the loudest of the BRICS nations remains China. The country continues to make headlines speculating about whether its economy could suffer a ‘hard landing’ in the face of its highly leveraged corporate sector and a fall in GDP to 6 per cent. But he is keen to put these figures in context: ‘Let’s be clear here,’ he says. ‘The US is struggling to find 4 per cent GDP growth, the UK is looking at 1.5 per cent, and the world is worrying about a Chinese slowdown to 6 per cent GDP growth?’ -China, not India, will dominate future Asian growth: The growth rates of the BRICS economies, with the possible exception of India’s, over the next 10 years is likely to be about half that of the previous decade, according to Smith. India’s and China’s shares of global GDP growth will probably be smaller, but the countries will remain dominant. ‘China will remain the largest [BRICS] economy and should continue to command investors’ attention,’ he says. ‘But if India opens up and reforms, investors should begin to devote more of their attention to the subcontinent.’ That said, he points out that, given the relative size of the two economies today, it would still take more than 30 years for India’s GDP to exceed China’s, even if India achieves all its reform goals and China achieves few of its aims. Ultimately, the strength of the BRICS as an investment proposition is their very diversity, argues Ballard. ‘They are so different that they provide an element of diversification beneficial for any long term investor.’
The Centre for Economics and Business Research (CEBR) suggests China’s economy is set to overtake the US with Asia’s major economies to continue moving up in the list in 2018 and beyond. India is expected to become the world's third-biggest economy in dollar terms, moving aside its former colonial master Britain along with France. India will reportedly advance to third place by 2027, overtaking Germany. According to the World Economic League Table, published by the London-based think tank, the four largest economies in 15 years are predicted to be China, the US, India, and Japan. By 2032, South Korea and Indonesia are projected to enter the top ten of the world’s largest economies, pushing out G7 countries Italy and Canada. In fourteen years, three of the four largest economies will be Asian - China, India, and Japan, according to the CEBR. The analysts also said that India’s growth will continue with the country to take the top spot in the second half of the century. Earlier this year, the US consulting firm PricewaterhouseCoopers said China would dominate the global economy by 2050. At the same time, IMF analysts expect India to overtake the UK and Germany as early as 2022.
I think sellers are coming into the market, the great unwind could well be underway, toppy & bubbles everywhere markets. Will be interesting to see where we are by March ‘18
ny boy
getting interesting again
bit of a tumble today ... may need to top up soon
nice surprise RNS Number : 2412X JPMorgan Chinese Inv Tst PLC 22 November 2017 LONDON STOCK EXCHANGE ANNOUNCEMENT JPMORGAN CHINESE INVESTMENT TRUST PLC DIVIDEND DECLARATION AND CHANGE IN ALLOCATION OF EXPENSES The Board of JPMorgan Chinese Investment Trust plc announces that, subject to shareholder approval at the Annual General Meeting to be held on 26th January 2018, a dividend of 1.60 pence per share will be paid on 7th February 2018 to shareholders on the register at the close of business on 15th December 2017. The ex dividend date is 14th December 2017. The Board has recently reviewed its policy of allocation of expenses (management fee and finance costs) to revenue and capital. Since the launch of the Company in October 1993, the Company has allocated 100% of expenses to revenue. However, with effect from 1st October 2017, the Board has decided to split the allocation of expenses between 75% to capital and 25% to income. This change will result in an increase in future dividends paid out by the Company such that it is able to maintain its investment trust status. 22nd November 2017
walter walcarpets
Can emerging markets maintain their momentum? By Graham Smith: When markets surprise, they have a habit of doing so in a big way. This wasn’t supposed to be a great year for emerging markets but, so far, it has been. The MSCI Emerging Markets Index went up by almost a third in US dollar terms over the ten months to the end of October¹. Rising interest rates in the US have the potential to apply a substantial headwind to emerging markets. They make it relatively more attractive for global investors to plant their money in US assets and avoid the additional risks associated with smaller, developing countries. At the same time, higher US rates make it more expensive for nations dependent on foreign loans to service their existing debts and borrow more. As always though, we find ourselves somewhere between two big pulls. On the other end of the rope this time is economic growth. In a developed world where growth of 2% to 3% is considered strong enough to withstand rises in interest rates, the International Monetary Fund’s expectation that emerging markets will continue to grow at a rate of about 5% per annum looks impressive². So where is the growth coming from? For a start, China seems on course to expand by about 7% this year. While that’s a big step down from the 10% growth rate we saw earlier this decade, it’s still enough to belie some extraordinary progress. Online sales of physical goods were 29% higher in the nine months to September compared with the same period in 2016.³ That’s good news for the host of nearby countries that send exports to China. Malaysia, for instance, which sells components used in the latest generation Apple and Samsung smartphones, said last week that exports to China were up 27% year-on-year in September⁴. Then there’s Brazil, in a much weaker position, but with prospects improving. Following a damaging two-year-long recession, a rebound in consumer spending stabilised the economy in the first half of this year ⁵. India, almost the world’s fastest growing large economy in fiscal 2016-17, has slowed as the country absorbs the combined impacts of last year’s cancellation of high value bank notes and the introduction this year of a national goods and services tax. However, these effects are only expected to be transitory, turning positive for the economy longer run according to the World Bank⁶. Since corporate earnings have broadly grown in step with stock market gains this year, emerging markets continue to look attractively valued on a relative basis. At the end of last month, the MSCI Emerging Markets Index traded on 16 times the earnings of the companies it represents, and at a 23% discount to world markets generally. That valuation gap is more or less maintained when using forecast earnings – 13 times for emerging markets versus 17 times for the world⁷. You could, perhaps, explain away these mismatches by the risks that remain. Capital has continued to flow into emerging markets, even as US interest rates have gone up. As in the period 2003 to 2006, emerging markets are enduring rising rates, partly because those rises have coincided with healthy global growth⁸. However, that could still be undone by any factor that sees the US dollar returning to favour, particularly if that factor involves a rise in geopolitical stress or unexpected deterioration in the world growth outlook. That would place renewed pressure particularly on countries with US dollar currency pegs and large debts. Malaysia would be one – its banks are highly dependent on dollar funding⁹. As usual, investors seeking to add growth from emerging markets to their portfolios might do well to spread their risks. Fortunately, emerging markets are a heterogeneous mix, with commodity producers like Russia, Indonesia and South Africa included alongside the increasingly consumer oriented markets of China and India.
By Ian Cowie: Fidelity China Special Situations (FCSS), the £1.8 billion investment trust that ended Anthony Bolton’s career on a bit of a bum note but has since recovered strongly, delivered total returns of 26% during the last year. JP Morgan Chinese (JMC), a longer-established trust but a relative tiddler with assets of less than £270 million, shot the lights out with total returns of 39% over the same period. Cynics might say this is a flash in the pan but five-year returns from these investment trusts of 227% and 137% respectively suggest there is more to China than a mere financial fad. Sceptical souls might fear that by the time the media notice an emerging market it is always too late but, while both these trusts’ shares continue to trade around 12% discounts to their net asset values, there is room for further gains. Closed-end funds are the ideal way to get into this formerly closed-economy because their structure means long-term investors will not be forced to subsidise short-term speculators when they dash for cash, as will happen in highly volatile markets from time to time. By contrast, open-ended vehicles – such as unit trusts and exchange traded funds (ETFs) – may be forced to sell their most liquid and perhaps best underlying assets to meet redemptions. Never mind the technical details, though, what about the big picture? While the world has been looking in the other direction, mesmerised by Donald Trump’s antics in America, another president, Xi Jinping, has quietly consolidated political power and enabled economic progress on a scale rarely seen. Xi is said to see himself continuing the work done by Deng Xiaoping, who became leader in 1982 and introduced a ‘socialist market economy’ to repair the damage done by Mao Zedong’s communist policies that caused millions to starve to death. Little red book fan, John McDonnell, please take note. Now the International Monetary Fund and PriceWaterhouse Coopers are among those who predict China will overtake America as the world’s biggest economy within a decade. The collision of new technology and the same old authoritarian politics is accelerating the rate of change. With a repressive regime that routinely imprisons journalists and anyone else who criticises the government, China could never allow American internet giants free access to its population that comprises a quarter of all humanity. So home-grown rivals – such as Alibaba, Baidu and Tencent – were always guaranteed a clear run at the home market and have clearly taken up this opportunity to the full. This is a bit of a painful topic for me because I invested in what was then Fleming Chinese Investment Trust more than 20 years ago, after visiting Shenzhen and Shanghai. What followed was an exciting ride, with the share price doubling in the run-up to the handover of Hong Kong in 1997 but halving not long afterwards. Things picked up in the noughties, despite a painful spike lower in 2008, before a terrific bounce in 2009 when I took profits to pay for a classic sailing boat and sold the last of my direct interests in that country. Since then, with the benefit of hindsight, I can see that I have taken my eye off the ball. If only I had hung on to those red chips but am now thinking of investing there again. Fidelity’s trust looks marginally more attractive to me because, according to Edison Investment Research, it has shunned banks and property where a nasty surprise might be lurking in the ‘shadow economy’. Instead, Fidelity holds Hutchison China MediTech (HCM) - which has exciting prospects of a cure for some cancers - along with bigger stakes in Tencent and Alibaba. There is also a modest yield of 1.1%, which has risen by 20% over the last five years and is more than double the dividends paid by JP Morgan’s rival trust, where there has been no progress in payouts at all, according to Association of Investment Companies statistics. You don’t need to be a communist or be invited to the congress jamboree to see money-making opportunities in China.
Those are all views of China and its prospects. JMC has risen strongly since the turn of the year, but how does it compare with other China funds?
Economists have upgraded their forecasts for China’s economic growth this year and project consumer inflation will continue to moderate. Analysts projected faster economic expansion in each of the next four quarters in a Bloomberg survey from April 18 to 25 compared with forecasts in the March poll. They also reduced their expectations for factory and consumer inflation this quarter. Growth in the world’s second-largest economy unexpectedly picked up to 6.9 percent in the first quarter, clocking its first back-to-back acceleration in seven years, while industrial output advanced, factory prices surged and investment recovered. The central bank has transitioned to a tighter policy framework, with increases for some bank lending rates.
The Chinese economy is expected to continue to stabilize in 2017 as several factors will combine to support the trend, a Chinese economist said Thursday. Domestic demand is expected to improve in 2017 as there is still much room for infrastructure investment to grow while manufacturing investment might also pick up, said Li Wei, head of the Development Research Center of the State Council. The country's export growth may enter positive territory this year, he said during the Center's national policy consultation work conference held in the southern city of Shenzhen. China's economic growth held steady in 2016, with improved power and crude steel output as well as auto sales, Li highlighted. The producer price index, which measures the cost of goods at the factory gate, has stayed in positive territory since September last year, when it ended a four-year streak of declines thanks, in part, to the government's successful campaign to cut industrial overcapacity. China's major industrial firms reported an 8.5 percent profit increase in 2016, reversing the 2.3 percent decline registered in 2015. Meanwhile, China created 13.14 million new jobs for urban residents, exceeding the target of 10 million. "All these signs showed that the imbalance between supply and demand is easing and the quality of economic growth is improving," said Li. Besides, major international agencies forecast world economy would edge up this year. However, Li also warned of uncertainties in global markets and suggested that concrete steps should be taken to guard against financial risks. The World Bank in January kept its forecast for China's economic growth rate for 2017 at 6.5 percent, saying that the economy will continue sustainable growth as it is rebalancing from manufacturing to services, despite reemerging concerns over the property market. The Chinese economy grew 6.7 percent year on year in 2016, the lowest reading in nearly three decades, but within the government's target range.
China Will Avoid a Bank Crisis, Reach High Income Status: Morgan Stanley Bullish analyst report details long-term outlook for economy China’s economy forecast to attain high income status by 2027 China will likely avoid a financial crisis and is on track to reach high income status by 2027, according to a new Morgan Stanley report on the nation’s longer-term prospects titled "Why we are bullish on China." The sweeping outlook comes amid growing concern over China’s surging debt levels, slow pace of reforms and the impact of a potential trade spat with the U.S. While acknowledging those concerns as legitimate, the analysts point to the country’s increasing shift into high value-added manufacturing and services that will play a central role in boosting per capita incomes to $12,900 over the next decade from $8,100 now. If China manages to pull off that feat, it will join South Korea and Poland as the only large economies with a population of over 20 million to achieve that over the past three decades, Morgan Stanley said. The World Bank defines high-income economies as those with a gross national income of at least $12,476 per person. There are other positives, too. Consumption and services are increasingly powering growth and proposed structural reforms such as the closure of uncompetitive state-owned enterprises will clear the way for new, high-value added industries in areas such as health care, education and environmental services, according to Morgan Stanley. That would spur the creation of a new generation of Chinese multinational corporations with significant presences both at home and abroad. Low Risk: At the same time, the risk of a financial shock remains low even though overall debt soared to 279 percent of the economy last year from 147 percent in 2007. That’s because borrowing has been funded by China’s own savings and been used for investment. Strong net asset positions provide a buffer along with an ongoing current account surplus, high foreign reserves and the absence of significant inflationary pressures that would destabilize the financial system, according to the report. A one-off devaluation of the yuan is also unlikely though the currency will likely weaken further, according to Morgan Stanley. Indications that China’s leadership are shifting their focus from stimulating the economy to reining in financial risk bolsters their upbeat case, the analysts said. "The most significant development on the policy front is that policy makers are now signaling a willingness to accept slower rates of growth, and place more focus on preventing financial risks and asset bubbles, indicating that they would not protect growth at all costs, often with the use of investment of a low return nature," the analysts wrote. Debt Pile: Still, there are risks. Much will depend on the commitment to tackling the debt pile and reshape state-owned enterprises. It’s likely that China’s debt management will follow a path similar to Japan’s, although economic growth will compound at a much higher rate over coming years. Morgan Stanley sees growth at an average of 4.6 percent in 2021-2025. That’s less than half the 9.6 percent average growth rate over the past three decades. "With a starting point of lower debt, (China’s debt to GDP today is where Japan’s was in 1980) and per capita levels (China’s per capita GDP (PPP) today is where Japan’s was in the mid-80s)," the analysts wrote. "By not allowing for a sharp appreciation of its currency as Japan did after the Plaza Accord, China today is arguably better positioned to still achieve growth rates that can outpace global growth."
China is capable of achieving steady GDP growth this year despite global uncertainties, according to Standard Chartered Bank. "We expect China to continue to set its GDP growth target at about 6.5 percent for 2017 and the world's second largest economy could grow 6.6 percent this year," Ding Shuang, chief Greater China economist with Standard Chartered, told Xinhua in a recent interview. Ding pointed out that U.S. policies towards China and elections in post-Brexit Europe might complicate the international environment for the Chinese economy, while domestic slowdowns in the property and automobile markets might drag on consumption growth. China's real estate market will see slower sales pace as tightened regulations began to bite, while the sales of passenger cars showed signs of contraction by dropping 1.1 percent year on year in January. However, Ding said that other engines of economic growth were gaining steam in China. He said that the service sector would grow faster in 2017 as Chinese would demand better entertainment, health care, education and travel experiences, which could contribute to about 60 percent of GDP. Meanwhile, China's exports seem to be restoring momentum after a subdued performance last year. The country's foreign trade volume beat market expectations to grow 19.6 percent year on year in January. In addition to a lower comparison base and Spring Festival effects, the global economy is showing positive signs as the latest PMI figures in the United States and some European countries showed growing factory and service activities, according to Ding. He added that the yuan's previous depreciation would gradually help lift export performance. Ding pointed out that to sustain steady growth at about 6.5 percent, China would still have to combine effective policy tools. "While China decided to take a prudent and neutral monetary stance, the government needs to take more proactive fiscal policies to help prop up growth," Ding said. "China's debt level is still controllable and the government can lift the fiscal deficit-to-GDP ratio from 3 percent in 2016 to 3.5 percent this year.
Where is China’s economy headed in 2017? Stephen Green, economist at Capital Group, takes a closer look at the Chinese economy and discusses some of the challenges for 2017. Stimulus effects still feeding through the economy: I am more optimistic than most about the direction of the Chinese economy. The consensus view is that China’s economy will lose momentum in the first quarter of this year as the red-hot housing market cools and government stimulus wears off. There is also the risk of tense trade relations with the US. That said, in my view China’s economy can continue to grow along its current trajectory in the first half of the year, which is 6.5 per cent according to official government figures. Here’s why: There are enough new investment projects in the pipeline to support economic growth during the first half of 2017. Construction firms, for instance, reported order growth of greater than 30 per cent during the first nine months of 2016. This included a mix of big and small projects, ranging from real estate to infrastructure and manufacturing. The good news is projects tend to last two to four years. And by my count, this activity marks the greatest acceleration in new project starts since 2009. This should be supportive for commodity prices and global mining companies through the first half of 2017. There is a lot of scepticism out there right now about private sector capital expenditures, too – but there are early signs capex is recovering, with real interest rates down and some sectors showing obvious capacity shortages. To be sure, I do expect growth to slow in the second half of this year, especially with mortgage credit slowing and home sales having flattened. Pockets of strength in the housing market: There is a lot of bearishness about China’s housing sector. Home sales skyrocketed in 2016, as did prices, with approximately $1.4tn in new housing sold. Worried about a property bubble, government authorities are curbing incentives and rolling out buying restrictions as well as stricter lending requirements in some larger markets. This is certainly affecting activity in China’s 30 largest cities, where sales fell 20 per cent year on year in November. The market’s expectation now is that new housing starts will fall, denting gross domestic product growth and demand for commodities such as iron ore, copper and cement. I agree that sales will slow, but not to the degree that most suspect. Outside of the 30 largest cities, sales remain stronger due to affordability and the absence of government purchase restrictions. Immigration into smaller cities from surrounding rural areas will continue, pushing up the urbanisation ratio from its current 55 per cent level to nearer 70 per cent to 80 per cent over the next two decades. A lot of urban households want to upgrade their apartments, too. Interest rates also remain low, which should continue to support sales across most markets. Furthermore, we have moved past the horror stories of ghost cities. Inventories continue to shrink nationally and housing stock in the bigger cities is at pre-glut levels. Inventories remain high in many smaller cities, though, so this is still a challenge. Along those lines, new housing starts should continue to grow for the next three to six months, I think. Historically, housing accounts for twice the commodities demand of infrastructure, so I am watching this closely. While cautious, developers appear to be building more again. Currency pressures, but no big devaluation: The Chinese renminbi is under pressure from capital outflows, the prospect of faster US interest rate increases in 2017, and worries that President Donald Trump will follow through on his pledge to slap tax penalties on imports. Despite these headwinds, I think there is a limited chance the People’s Bank of China (PBOC) will stray from its stated policy of steady depreciation and will pull the trigger on a big one-time devaluation. There are just too many risks for Beijing in that course of action – and this year, especially, no one has incentives for taking that risk. If the dollar stays strong, I do anticipate more aggressive measures by the PBOC to combat capital flight, making it more difficult for individuals and companies to move money outside China. The central bank will also keep tapping foreign currency reserves to prop up the renminbi, which fell more than 6 per cent against the dollar in 2016. Reserves currently stand at $3tn. While some $2tn is liquid and available for use, in my view Beijing would get very nervous if reserves shrank by a billion during the course of the year. I expect the renminbi to weaken some 6 per cent against the dollar this year, but there are risks. Until dollar strength abates, it’s going to be a bumpy ride for the renminbi. Get ready for China’s biggest turnover in political leadership in a generation: In the fall, China’s 19th National Party Congress will convene, during which five of the seven members of the Politburo Standing Committee – the inner sanctum of power – are due to retire. Maybe it turns out to be only four retirees – we’ll have to see. Close to half of the Politburo (25 members who influence policymaking) will also be reshuffled due to retirements and promotions, while the Central Committee will see large numbers of its 205 fulltime members step aside. That makes it a huge year politically. What unfolds will shape the country’s economic priorities for the next five years. For president Xi Jinping, this is a prime opportunity to strengthen his political clout. For one, I do not expect Xi to name a successor, thus setting himself up for a third term that would run through 2027. There is also a possibility a new premier will be named. That person could be Wang Qishan, a current member of the Politburo Standing Committee who spearheaded the unprecedented anti-corruption campaign. If he fills that role, he would be responsible for economic policies. This would have several implications: Wang is believed to be market-friendly, and would have the bureaucratic power to push some tough reforms through. This may include a major recapitalisation of the big state-owned banks to flush out the bad loans, and privatising some of the debt-heavy state-owned enterprises. That said, any such program would have to be approved by Xi – and his real intentions are very hard to read, though there is much evidence to suggest he believes that strong party control of the economy is vital to China’s continued rise.
America versus China: A changing of the guard - By Jan Dehn head of research at Ashmore: It has been on the cards since 2008/09. China has been preparing for it for years with aggressive reforms, even at the expense of slower growth. The US and other developed economies have been drifting inexorably towards it on a wave of myopia, neglect of reforms, debt issuance and, lately, a lurch towards economic nationalism. And so we have finally arrived at the inevitable turning point, when China formally took over the mantle from America as the world's undisputed leader on economic issues. Revealing a shocking degree of economic illiteracy, US president Donald Trump claimed in his inaugural speech that "protection will lead to great strength and prosperity". America's economic abdication: His bleak, defensive and atypically American vision of pessimism and defeatism was a de facto abdication of America's erstwhile role as undisputed global leader on economic issues. By contrast, Chinese president Xi Jinping's message at Davos spelled out a positive and ambitious agenda of openness and support for globalisation with the words: "Protection is like locking yourself in a dark room." The irony of the contrasting positions adopted by Xi and Trump was not lost on the press: here was the leader of Communist China standing up for free markets, while the leader of the free worl' proposes to turn his country's businesses into the equivalent of protected French farmers. In reality, however, China has been liberalising its economy for decades. The hand-over of global economic leadership will severely challenge the finance industry, which is usually desperate to be seen to be on the side of power. The US economy is still bigger than China's, and global financial markets are far more invested in the US than in China. The finance industry now finds itself in the uncomfortable position of having to justify the usual bullish stance on the US despite the fact that even half-educated economists can tell you that the policies under consideration by the Trump administration will have a negative impact on the economy. We think it is a fool's game to try to suck up to policymakers if their policies are bad. Far more businesses will lose than gain. In the 1970s, the US tried in vain to protect a car industry that produced enormous gas-guzzling vehicles against imports of smaller, more fuel-efficient and ultimately more sophisticated Japanese vehicles. "Eat your Japanese car", said the bumper stickers, yet today we all drive smaller, better, more economical cars. In retrospect, it is clear that Japan was not to blame. The Japanese cars were just better. Imports were not the problem either. After all, they just provided consumers with the goods they really wanted. Protecting dying industries can save jobs in the short term, but protectionism becomes ridiculous in the longer term. For example, suppose the good people of the Stone Age had insisted on defending the flint-axe industry as the Bronze Age beckoned. China's relentless reform: It is obvious that no amount of protection would have saved the flint-axe industry as times and technology moved on. It is the same situation today: American industry today needs to man up or shut down, not be kept alive by artificial means at huge cost to the rest of the economy. Clearly, China and the US are setting out on paths that will accelerate China's economic hegemony, while the US is now directly undermining its own economic future. China's path is one of relentless reform, while America's is one of relentless stimulus. China is opening up as America is closing. Investors and the rest of the world should take notice of these contrasting developments. Leadership is not free. Leadership requires bravery. Leadership demands the strength to hold firm to principles that are known to be right, even in the face of populism. China has displayed precisely these characteristics in recent years, when, to the puzzlement of many, China has insisted on reforming even at the expense of a slowdown in growth. Perhaps now China's path will begin to make sense to the China-detractors. The truth is that China astutely recognised that 2008/09 was a debt crisis in the Western world, and that the widely adopted policy response - yet more fiscal spending and money-printing rather than tackling the underlying problems of excess debt and declining productivity - would ultimately lead to a more hostile environment for Chinese exports. Indeed, regardless of whether the hostility was due to diminishing demand in the West, weaker currencies due to quantitative easing and inflation, or protectionism à la Trump, China's critical insight was that American policy would ultimately seek to pass the cost of its own policy mistakes onto foreigners. This insight prompted China to commence an enormous reform effort to try to rotate its economy's growth drivers away from exports towards consumption, even if this required extremely tough reforms. China has therefore pushed ahead relentlessly with interest rate liberalisation, price liberalisation, painful productivity-enhancing reforms and capital account liberalisation. And the reforms will continue. This is an opportunity for China detractors to stop and reflect anew: China was early and absolutely right in expecting hostility from the West and China was prudent to start to prepare early. China to overtake the US by 2027: Unlike Mexico, which continued to cling onto the flawed notion that the US would always be a force for economic good - and is now paying a heavy price for its naïveté - China read the economic tealeaves exactly right and is far better prepared as a result. There is no doubt that global economic leadership will now gravitate to the East. In addition to exercising leadership of key economic issues, China is well underway to becoming a true economic giant. Based on the International Monetary Fund's forecasts for Chinese and US medium-term real GDP growth rates of 6 and 2% respectively, we estimate that China's economy will overtake the US economy within 10 years (by 2027). Using PPP-adjusted per capita GDP and scaling up by the ratio of the Chinese population to the US population, we estimate that China's economy will be 4.1 times larger than the US economy by 2050, and even without PPP-adjustment China's economy will still be 2.4 times larger by 2050. The rise of China will have many profound implications. The world's currency and bond markets like to benchmark themselves against the largest markets. One obvious implication is therefore that CNY and the Chinese government bond market will replace the dollar and the US Treasury market as the world's main benchmarks for FX and fixed income. While China's rise to unassailable economic and financial supremacy will be impressive in their own right, we think it is the rise of China as a consumer nation that will really take the biscuit. China's savings rate is likely to decline from 49% today towards single digits by the middle of the century. This means that China will experience the largest consumption boom the world has ever seen, as consumption rises even faster than GDP. If America turns in on itself in some forlorn effort to cling on to former glories, the once legendary US consumer will be far less impressive in the future. All this matters so much because global trade relationships are strategic in nature. It takes years of building trust to create truly deep and lasting trading relationships. From the very highest level of executive power, the pathways for these two nations have now been laid bare for all to see. China is going to win and is inviting the rest of the world to ride along.
China is a vital driver of global growth, but its economy expanded only 6.7 percent in 2016. Manufacturing activity in China slowed slightly in January, official figures showed on Wednesday, as the world's second largest economy shows continued signs of stabilising. The official purchasing managers' index (PMI), which gauges conditions at factories and mines, came in at 51.3 in January, down from 51.4 the previous month. The key manufacturing sector had been struggling in the face of sagging world demand for Chinese products and excess industrial capacity left over from the country's infrastructure boom. But an upturn in the housing and construction markets thanks to cheap credit — following a series of monetary easing measures — has contributed to a sharp rebound in manufacturing activity. Beijing has said it wants to reorient the economy away from relying on debt-fuelled investment and towards a consumer-driven model, but the transition has proven challenging.
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