Coverage in newspapers and in analyst reports often errs towards the negative, as seen by the speed with which descriptions of China moved to wholesale panic over its economy making a hard landing while forecasts still put its 2012 GDP growth at north of 7.5%.
Next year this growth figure may be lower still but it is still represents a figure twice that of the global growth figure of 3.6% recently forecast by the IMF.
Among many allegations it is fending off right now, the BBC has a reputation as one commentator whose glass is half empty, referring to China as “stalling” when it is simply not growing as quickly as it did over the past decade – China is neither “overheating” nor “slowing too much”.
China’s stock markets may have under-performed over the past two years but it is not as if this is the first time China has wobbled in this way (look at 1995, 2003 and 2009 for example).
Talking with Mansfield Mok – a renowned stock-picking China equity fund manager now at EFG Asset Management – earlier this week, he was quick to remark on the $3bn of Chinese stocks that investors have sold out in two weeks. He also pointed to the MSCI China Index that is now trading at valuations similar to those seen in 2008.
Now might actually be a time to buy into China, but what to buy will depend on how China will grow.
The emphasis for its growth, particularly when the new rulers take up their positions later this year, will be focused on domestic consumption rather than it being export-led.
This ties in with its current five-year plan, approved in March last year and running until 2015, that refers to “higher quality growth” and “inclusive growth” that aims to resolve the issue of the disparity of wealth in China – something else that will not happen in the next four years.
Incomes in China are already rising rapidly and the five-year plan also includes a plan to double individual income during its timeframe.
There is no doubt that, from an investor’s point of view, it is those companies and sectors providing goods and services to individuals in China that will benefit the most, and not necessarily the luxury brands – income per capita is still too low for Hermes and Bulgari to take off just yet – but the providers of toothpaste and other basic essentials.
China is less vulnerable to a weak external economy and this even-more concentrated domestic focus will only bolster it further. The good news is that the business opportunities are there for Western companies to take advantage – can anyone name a brand of Chinese toothpaste? – as are the investment opportunities for fund management groups.
Just because our own economic malaise is likely to last for another four years it does not mean that everyone’s will.
