What Next for China?

China, the dominant country in Emerging Asia, is trying to keep its domestic economy motoring along and bring the technology sector into line

James Gard 26 July, 2021 | 11:02AM
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Shanghai skyline

China was the best performing equity market in the world in 2020 but has struggled to match that growth in 2021 so far. The rapid post-Covid 19 economic recovery appears to have run out of steam, while government intervention in the tech sector has unnerved global investors. China’s high-growth tech stocks like Tencent (00700) and Alibaba (BABA), have also fallen out of favour as value companies have staged a dramatic comeback. We look at the outlook for China this year and beyond and the key themes for investors.

The Trade War Isn’t Over

Tension between the US and China ramped up during the Trump era so there were high expectations for a reset in relations during the new Biden presidency. But in many ways the trade war lives on and continues to have an impact on economic policies. China’s self-reliance and drive to strengthen regional ties remain key themes too. The Regional Comprehensive Economic Partnership (RCEP), a trade agreement signed late last year including China and Japan, will create the world’s largest trading bloc. Kiran Nandra, an emerging market specialist at Pictet, says this is a huge boost for the region, creating a powerful geopolitical bloc to take on the US.

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James Gard  is content editor for Morningstar.co.uk


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