These are the 60 reasons why you should invest in China funds.
Article published: Monday, 28 Sep 2009
by Matt Comyns, CEO of JLM Pacific Epoch
1. 30 GREAT YEARS – After a difficult 30 years, China has had 30 great years of economic reform and momentum. This is why it bounced back so quickly from the global crisis.
2. REAL GROWTH: China’s growth is real and sustainable and increasingly driven by domestic consumption. Domestic consumption was the biggest driver of GDP growth in 2008, contributing 4.4 percentage points to the overall GDP growth rate of 11.4% for 2008.
3. NATIONAL BALANCE SHEET – China has approximately $2.2 trillion of foreign reserves and public debt is only 16.2% of China’s GDP, ranking it 101st in the world for debt as a percentage of GDP.
4. GDP - China has the world's highest gdp growth and should surpass the US as #1 economy in the world within the next 15-20 years.
5. STABLE GOVERNMENT - China has witnessed decades of peaceful transitions from Deng to Jiang and from Jiang to Hu. There is no real danger of regime change anytime soon.
6. GLOBAL RECOVERY LEADER – China has arguably handled the global crisis better than any other country in the world. China posted GDP growth of 6.1% in Q1 and 7.9% in Q2; The World Bank predicts 6.5% GDP growth for China compared to a 1.7% contraction globally.
7. NIMBLE/FAST REPONSE TO CRISES – In addition to its rapid response to the global crisis, China has demonstrated an ability to rally domestic support in times of natural disasters such as the Sichuan earthquake, the winter storms in 2008 and SARS in 2003.
8. STIMULUS - Fast and effective, the four trillion RMB ($586 billion) fiscal stimulus has more than propped China up in the global crisis. China has spent the equivalent to 20% of its overall GDP.
9. LOOSE MONETARY POLICY. China will continue to be liberal with its monetary policy, further stimulating growth.
10. BRIDGES TO SOMEWHERE – Enormous investments in infrastructure will lead to great productivity gains. The China road length per capita figure has more than doubled since the 1970s and, over the past decade, has been growing at an average annual rate of 16%.
11. EXPORTô€ƒ†CONSUMPTION – While the previous 30 years of China’s growth have been focused on exports, future growth is aimed at unleashing pent-up consumer demand. Early signs point to the development of a robust domestic consumer economy.
12. NEW GENERATION OF CONSUMERS – There has been a cultural shift among China’s young generation towards “making more, spending more and saving less." Unlike their parents, Chinese people born after 1980 have only known prosperity and growth. That change is dramatically affecting consumption habits.
13. POPULATION = HUGE MARKET- China is one of the few places on earth where quantity becomes quality. It has a population of 1.33 billion (as of July 2009) with a 0.65% anticipated yearly growth rate.
14. SAVINGS - (Chinese saving rate is around 40% compared to around 5% in the US.) - Retail bank deposits in China total more than $3 trillion, almost 50% of US retail deposits. There is still lots of money on the sidelines that can be tapped.
15. GROWING INFLUENCE IN THE WORLD – Recent events like the 2008 Beijing Olympics and the upcoming Shanghai 2010 World Expo have raised China’s global profile. That combined with an attractive growing economy and a tremendous national balance sheet means that China’s voice will only get stronger over time.
16. NATURAL RESOURCES: China is taking advantage of lower global prices and securing access to natural resources all over the world. This will support domestic growth for years to come.
17. BANK STRENGTH – Chinese banks have far healthier balance sheets than their Western counterparts. Multiple China-based banks are among the top in the world by market capitalization, such as BoC, CCB, ICBC. NPLs, like in the past, are likely to be swept under the rug over time.
18. HOUSING BOOM - The real estate "market" has only a dozen years of history, and was legalized by a State Council regulation published only in 1998. China has just come through its first real estate boom-bust cycle, and the market is now strengthening in a more stable way
19. RMB APPRECIATION - The Chinese currency will strengthen over time and only after China has comfortably switched away from an export led economy.
20. 2ND AND 3RD TIER CITY STRENGTH – The recovery has been led by 2nd and 3rd tier cities. The government’s vast efforts on inland/western development has led to GDP gains in inland provinces that have significantly outstripped traditional coastal counterparts. 13 provincial level regions reported double-digit GDP growth in 2008, with Inner Mongolia region leading with 16.2% GDP growth compared to 7% for the coastal Shanghai region
21. DOMESTIC STOCK MARKET STRENGTH - The Chinese government is actively supporting the development of its stock markets, including the launch of GEM (China's Nasdaq). Also, as China is such a huge player in commodities globally, they will likely be major players with their own commodities exchange.
22. PRIVATE INVESTMENT GROWTH - China is embracing policies to encourage private investment to drive real growth and become less reliant on state support. The latest private equity industry policies are good examples of the pro-private investment mandate.
23. DIVERSIFYING INVESTMENTS –China has been slowly shifting its overseas investments to lessen its dependence on the U.S and Europe. Three focus areas include ensuring adequate, diversified supply of natural resources, diversifying foreign exchange holdings and finding new markets for Chinese exports
24. FDI STRENGTH – While inbound foreign direct investments (FDI) have been muted thus far this year, once multinational corporations (MNCs) recover from financial crisis, many will look to kick-start growth in China. We are already seeing this in 2H 2009. China is one of the greatest MNC growth engines of the future.
25. TAX ADVANTAGE– Despite the relatively high official tax rates, enforcement has been lax. China won’t run out of bullets anytime soon. For example, China has no annual real estate tax or capital gains tax. The government has plenty of ways to throttle revenues in the future.
26. SME (Small and Medium-sized Enterprises) PROSPERITY – SMEs have constituted an essential part of the national GDP as the government establishes policies and funds aimed at promoting innovation and entrepreneurship such as the China Torch Program and Innofund. China is no longer just a state-owned economy.
27. INTERNET DOMINATION – With a total 338 million Internet users in 2009, which has tripled over the past three years, China has surpassed the US as the world’s largest Internet market. And the growth still has plenty of running room. Internet users are currently growing at a clip of 80mm new users per year.
28. GREEN TECH LEADER - Government support/subsidy is key to being the world leader in green tech, and China clearly has that support. China is spending $30 billion on green technology as part of its current stimulus plan. One example of a new policy recently unveiled is the "Golden Sun" initiative in a bid to achieving its ambitious solar power generation target in 2011.
29. MOBILE PHONE USERS. Approximately 800 million mobile phone subscribers and growing. A connected China is a powerful China.
30. NEW WAY TO PAY – The introduction of credit cards, online payments, and debit cards are all helping to fuel consumption.
31. MOBILITY – Thanks to new regulations, Chinese people are free to move around internally and internationally. Domestic travel in particular is booming. Increased mobility = increased productivity.
32. “TRADE WARS” - are not an issue. With exports down, China is not looking to pick any fights. And the US is far too busy with health care reform, Iraq/Afganistan, and now Iran to be escalating any trade issues with China. The US also does not want to rock the boat with its biggest debt holder.
33. AUTO MARKET LEADER - China is expected to be world's largest auto market in 2009, with the passenger-vehicle sales rising to 858,300 units in August, up 90% y-o-y. Its burgeoning domestic car companies will soon enjoy the spoils of its own lucrative market.
34. MINING SECTOR – After years of under-investing in mining, China has been rapidly playing catch up with the world. In addition to buying up natural resources outside of China, China is unearthing significant finds domestically.
35. HEALTHCARE REFORM – As part of its effort to shore up the social safety net the government is spending billions of dollars on health care. As people feel better taken care of they will spend more and save less.
36. FARMER LAND RIGHTS – The great untapped promise of China is its farmers. The government recently provided farmers with greater land rights which will encourage investment and enhance the tradability of farm land.
37. LOCAL FUND INDUSTRY- The domestic fund industry is just developing now, helping to further grow China’s financial markets.
38. CROSS STRAIT RELATIONS – The thawing of relations will benefit both China and Taiwan.
39. HONG KONG - HK continues to be a fantastic gateway to China and an extra engine for the development of the mainland. HK's continued strength is mutually beneficial.
40. CHINA HELPING ASIA AND ASIA HELPING CHINA – China is a new global engine for growth. This is especially true in Asia. Thanks to China, Asia as a whole has been better off from the financial crisis compared to the rest of the world. Asian countries will support each other and succeed together.
41. BROAD BASED SUPPORT. – China has many stakeholders in the success of its economy. The rewards are distributed fairly widely, unlike in many banana republics. As a result, many citizens are pulling on the same rope.
42. HIGH PURCHASING POWER+ LOW COST OF LIVING-With fast growing GDP per capita on a PPP basis, Chinese are enjoying a higher standard of living that will spur further consumption.
43. EDUCATION A TOP PRIORITY – Chinese are willing to spend heavily on education, which creates not only a major investment opportunity in the short-term, but also a supply of more trained and skilled workers to help China move its economy up the value chain. The population has a 91% literacy rate – even taking local provinces into account.
44. MOVING UP THE VALUE CHAIN – China is moving up the value chain in manufacturing. China is now starting its own airplane company and making Airbus A320s in Tianjin and electric plug-in cars in Shenzhen instead of just t-shirts and toys.
45. IPOs -China is one of the biggest beneficiaries of the IPO markets comeback, just like in 2007 before the IPO market shut down for an extended period of time.
46. LONG TERM VISION - China policies tend to manage for the long term (5 year plans etc). China is patient and conservative...BUT...not risk adverse. They know when to double-down when they have a great hand, like now.
47. LIKE-MINDED CITIZENS: The cultural legacy of collectivism among Chinese citizens helps the government orchestrate powerful changes from the top to the bottom of the social pyramid. Contrast this to the US and its diverse interests (eg the current health reform debate).
48. SAVVY NEW LEADERSHIP – The new generation of Chinese leaders are much different than their predecessors. Many of them have been educated in the West and served in International roles. These new leaders will be able to toggle between domestic and international markets with ease.
49. MANDARIN ADOPTION - Countries all over the world are investing in Chinese language skills. This will only perpetuate the growth/success of China.
50. MONEY MAKES MONEY. China sits in the enviable position of having a birds-eye view on the best deals domestically and internationally. And it is often invited to participate in these deals. China’s sovereign wealth fund, for example, buys into many of these deals and its participation (given its market clout) almost guarantees the success of these companies/investments.
51. PRAGMATIC. The Chinese tend not to “overthink” things. They focus on the basics, what usually makes economic sense.
52. ECONOMIC FREEDOM, NOT POLITICAL FREEDOM – Similar to the above point, Chinese will take what they can get. They fully understand that political freedom is not coming any time soon and choose instead to concentrate on the areas that the government has given them flexibility…the economy.
53. NO MILITARISTIC AMBITION – China has always looked more inward than outward. Leaders at the top are aiming for stability, not world domination.
54. WORK ETHIC - Chinese are known to have an amazing work ethic. Success cannot be achieved without hard work. After being held back for so many years, they wont waste their current opportunity.
55. LAND OF ENTREPRENEURS - Americans have met their match in terms of entrepreneurial prowess. Don’t be fooled by the “Communism” label. The Chinese are pure capitalists.
56. HISTORIC PERSPECTIVE - China has been # 1 before. They are well versed with their own history, and they are not timid about getting back to that # 1 spot. China feels that is where it belongs. China in Chinese is “Zhongguo” or “Middle Kingdom” (center of the world).
57. QUICK LEARNERS - China learns and adapts fast. Visit China now and come back 5 years from now, and you will see a vastly different country.
58. HOME FIELD ADVANTAGE - Foreigners often complain about the “rules” in China and the lack of a fair legal system. To be sure, China plays by its own rules. This will only benefit its home-grown winners in the most lucrative market on earth.
59. TIMING – China is rising while the US and other powers are falling. China is at the right place at the right time with the right balance sheet.
60. CONFIDENCE IS HIGH. With 30 years of successful reform, China has a bounce in its step right now. Success breeds success.
61.
Tingkat terbawah dalam hirarki kewangan individu ialah simpanan kecemasan (emergency cash)....dan ini adalah tahap kritikal yang sememangnya wajib ada dalam perancangan kewangan kita...ia bermaksud...simpanan yang amat cair dan boleh digunakan serta merta semasa berlakunya kecemasan dalam hidup...umpamanya kehilangan kerja...kebakaran...bencana alam dan lain2...dan mengikut pakar2 kewangan...simpanan ini haruslah mampu menampung kehidupan pemiliknya dan keluarga selama sekurang2nya 6 bulan....dalam kata mudah...6 kali gaji atau 6 bulan perbelanjaan biasa keluarga...
Dalam rajah perbandingan pulangan di atas...dapat disimpulkan....tahap risiko yang dihadapi/sanggup dihadapi vs pulangan yang bakal diperoleh...dan peratusan pulangan yang diletakkan diatas adalah berdasarkan track record terdahulu dan adalah di tahap pertengahan sahaja....sesiapa yang dah melabur sahaja yang tahu berapa tingginya pulangan dari pelaburan mereka...
