English   |   简体中文   |   登入
穩健 創造持久財富

研究及評論

ICBCCS on China background

What now for Chinese markets?
An interview with ICBCCS
I

Despite Q1’s 6.9% growth rate, the 2017 target is 6.5%, a touch lower than the 6.7% GDP growth achieved in 2016. With these lower projections, should investors still be optimistic? Vania Pang, of ICBC Credit Suisse Asset Management (International) Co. Ltd. (ICBCCSI)’s, Capital Markets and Investment Solutions of Index and Quantitative Investment team, weighed in.

Vania: The softening growth target together with the goal of maintaining stability reflect the government’s intention to rebalance the economy from credit-fuelled growth to a more sustainable growth path.

Instead of pumping up economic activities by increasing credit supply, continuing structural reforms and expansionary fiscal policy are deployed. Encouraging improvement in PMI and PPI were found since Q4 2016 as a result of the structural reforms launched in 2015. Industrial enterprises profits and revenue picked up significantly in Jan and Feb 2017 with 31.5% and 13.9% growth yoy respectively. Both the profit margin and ROA grew while the debt to asset ratio lowered to 56.2% (2016: 56.8%)[1]. Other policies such as ‘One-belt-one-road’ and the recently announced Xiongan Special Economic Zone could boost the investment and demand in infrastructure, energy, construction, and property in the medium-term.

The M2 and total social financing growth target are also at levels below that of 2016. What’s your take on these numbers?

Vania: The total debt of China exceeds 250% of GDP which posed a threat to the financial system. Excessive borrowing could be curbed by lowering the M2 and social financial growth target. It is a clear step forward for risk control.

Controlling financial risks was set as the priority in the Central Economic Work Conference in December 2016. A “neutral and prudent” monetary policy is implemented to contain risk, deleverage and to deflate bubbles. The PBOC raised the medium-term lending facility and seven day reverse repo for the 3rd time in three months since the beginning of 2017.

The central bank has been cautious in managing liquidity through reducing money supply and adjusting the short-term rates instead of the benchmark rate in order to avoid adding burden to corporates with higher borrowing cost.

A lot has been said about upgrading the real economy through innovation. What does that mean and where will those impacts be felt most?

Vania: It means providing long-term support for R&D, building infrastructure for science and technology and commercialisation of new technology. Development of emerging industries such as artificial intelligence, new materials and new energy will also be accelerated this year.

Financial support is crucial in making the technological innovation and upgrading happen. On 28 March, the PBOC said China will support the insurance companies to expand their scope to provide more low-cost and long-term funds for the manufacturers to upgrade. Furthermore, the government will provide monetary credit policy support for manufacturers to modernise and expand overseas.[2]

The plan of upgrading China’s manufacturing sector was first proposed by Premier Li Keqiang in 2015, known as “Made in China 2025”. The country plans to develop smart manufacturing and build home-grown brands with both design and production capabilities that could compete against international rivals. The trend of increasing the application of information technology and automation would impact the manufacturing sector most and foster its evolution.

Looking at the next several months, what are some of the key events and risks that could potentially influence the markets?

Vania: China will host the first Belt and Road Summit in Beijing in May 2017. The belt and road initiative aims to achieve connectivity and economic integration to promote growth in the region. The interaction with other countries and takeaways from the summit is important in understanding China’s influence on world stage and what opportunities the initiative could bring to China.

In November, The 19th Party Congress will be held where a significant leadership reshuffle will occur, including major changes to the composition of the Politburo Standing Committee (PSC). The president and the new PSC may reassess the current development strategy and announce new policy direction. Attention should to be paid on how the transition of power and new policy direction may impact the political and economic environment of China.

DISCLAIMERS

In this document, ICBC Credit Suisse refers to ICBC Credit Suisse Asset Management Company Limited and its subsidiary, ICBC Credit Suisse Asset Management (International) Company Limited (“ICBCCSI”). ICBCCSI is a regulated entity under the Hong Kong Securities and Futures Commission.


No account has been taken of any person’s investment objectives, financial situation or particular needs when preparing this document. This is not an offer to buy or sell, or a solicitation or incitement of offer to buy or sell, any particular security, strategy, investment product or services nor does this constitute investment advice or recommendation.

The views and opinions expressed in this document, which are subject to change without notice, are those of ICBC Credit Suisse and/or its affiliated companies at the time of publication. While we believe that the information is correct at the date of this presentation, no warranty of representation is given to this effect and no responsibility can be accepted by us to any intermediaries or end users for any action taken on the basis of this information. Some of the information contained herein including any expression of opinion or forecast has been obtained from or is based on sources believed by us to be reliable as at the date it is made, but is not guaranteed and we do not warrant nor do we accept liability as to adequacy, accuracy, reliability or completeness of such information. The information is given on the understanding that any person who acts upon it or otherwise changes his or her position in reliance thereon does so entirely at his or her own risk without liability on our part.

This material has not been reviewed by the Hong Kong Securities and Futures Commission. Issuer of this material: ICBC Credit Suisse Asset Management (International) Company Limited. This material shall be distributed in countries where it is permitted.

Approval code: 20170427-US-PU-M-01


[1] Source: National Bureau of Statistics of China. As of 28 March 2017.

[2] Source: Reuters, 28 March 2017. http://www.reuters.com/article/china-economy-cenbank-idUSL3N1H51S6

工銀瑞信資産管理(國際)有限公司 京ICP備05063708號