• The days of China being the manufacturing base of the world are coming to an end
• China will move toward improving individual consumption in the next 5 years
• The next decade for China is important as it seeks for quality growth over quantity as its competitive advantage
• Important initiatives include industrial upgrades with creation of new sectors, and industries focused on improving income distribution
Hong Kong, 18 April 2011 – Although the Chinese economy is slowing down, the growth rate being experienced in China will still be very attractive, relative to the growth rates being seen in the developed world, according to Fidelity International's team of leading China investment experts - Anthony Bolton, Martha Wang, Stephen Ma and Raymond Ma at the Fidelity’s Team China Media Forum 2011 today.
Fidelity International’s team of China investment experts has been investing in the market for the past 17 years and now includes Raymond Ma, Portfolio Manager based in Hong Kong and manages the newly-launched Fidelity Funds - China Consumer Fund in April.
Anthony Bolton, President of Investments, Fidelity International:
“What’s so exciting about China is that you are getting it at the early stages of the so-called ‘S curve’. It’s never happened on this scale, and it’s like Korea or Taiwan or Japan 20-30 years ago.”
Mr. Bolton also highlights the investment choices he has made guided by what he sees as the drivers underlying this prospect. “I have decided to focus particularly on sectors that are going to be the growth drivers of the Chinese economy over the next 10 years, and that takes me into the domestic economy, consumption and services, and away from international exporters. The days of China being the manufacturing base of the world are coming to an end, and the Chinese authorities don’t want to play that role,” he says. “That is one of the factors driving the latest 12th Five-Year Plan, moving towards improving individual consumption.”
Martha Wang, Portfolio Manager for Fidelity Funds - China Focus Fund:
“China is at a transitional crossroads. The ambitious initiatives from China’s 12th Five-Year-Plan such as social housing and reforms to spread wealth to all parts of the society, if successfully implemented, will enable China to transition its economy to a domestic consumption model. The next decade for China is important as the country seeks for quality growth over quantity as its competitive advantage as the world’s processing capital is diminishing with its aging and shrinking population led by 25 years of one child policy and rapid inflation in wages. However, the government seems fully committed in implementing and realising the necessary reforms to change the source of its growth.”
“In terms of current risks, I believe the concerns on China inflation might be over-done as CPI in China is getting to peak and will roll over. The prevailing inflation pressure, apart from some structural factors, has been largely driven by excessive liquidity resulting from post-crisis stimulus measures. China government started to phase out stimulus policies from the beginning of last year, and tightened up from 4Q10 amid revived inflation expectation. We are going to see the effect later this year.”
Stephen Ma, Portfolio Manager for Fidelity Funds - China Opportunities Fund:
“As China continues to pursue structural reform to ensure sustainable economic growth the focus will be increasingly on pro-consumption policies to stimulate domestic consumption as well as improving quality of growth versus quantity. Important themes in the government’s policy pipeline surround industrial upgrades with creation of new sectors such as alternative energy, environmentally-friendly chemicals and materials, and industries focused on improving income distribution in a way that will bring harmony to society. Social housing, infrastructure projects in energy and industrial upgrades by moving away from the traditional low value-add reassembly manufacturing to higher value-add industries such as machinery and IT are prime examples of initiatives that are likely to dominate the government’s agenda for the next five years and on.”
Raymond Ma, Portfolio Manager for Fidelity Funds - China Consumer Fund:
“I expect Chinese authorities to continue to raise rates as the fight against inflation goes on. The pressure brought by inflation will be stronger in the first half of 2011, and there will be one to two more rate hikes for the rest of 2011.” However, he does not expect this to impact the Chinese consumer story very far. “People’s readiness to consume is affected more by CPI and their expectations of wage increases. China is still witnessing a trend of wage increases. In general, Chinese consumers are not very sensitive to interest rate hikes.”
Mr. Ma also expects little effect from rate hikes on the stock market. “Market liquidity has a stronger impact than interest rate on China’s stock market, especially the A-shares market. Of course the rate hike will have certain impact on the market, but it will not be as significant as the impact from liquidity,” he added.
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About Fidelity International
Fidelity International provides investment products and services to individuals and institutions in the UK, continental Europe, the Middle East and Asia Pacific. Established in 1969, the company has over 5,400 staff in 23 countries and manages or administers client assets US$309.7 billion as at 31 March 2011. Fidelity has over 7 million customer holdings and manages more than 750 equity, fixed income, property and asset allocation funds. Fidelity’s fund managers receive research from one of the largest proprietary research teams, covering 99% of the world’s largest listed companies. Fidelity International is an independent company which is privately owned.
Tel: 852 2629 2800
Tel: 852 2629 2800