Fidelity’s Team China comments on how China’s 12th Five-Year Plan will impact investments
- Social spending and industrial upgrades are the two most significant areas in the plan
- Consumers, property, infrastructure, new energy sectors likely to benefit
- China’s 12th Five Year Plan remains important due to its role in the 2012 leadership change
Hong Kong, 7 March 2011 – In view of the National People’s Congress currently taking place between 5-15 March, Fidelity’s China specialists said today that the two most significant areas of the 12th Five-Year Plan (FYP) are social spending and industrial upgrades because they are helping shift China's economy to a consumption driven model which will benefit stocks in the consumer, property and infrastructure sectors.
“The 12th FYP remains highly important for investors and relevant, especially due to its role in the pending 2012 political succession, because it will influence and be influenced by the incoming leadership,”’ said Catherine Yeung, Investment Director at Fidelity International.
“The government’s initiatives around social spending and industrial upgrades are critical because they are designed to shift China’s economy from an export-driven posture to a consumption-driven model. The sectors most likely to reap the benefits of the new domestic consumption emphasis are second- and third-tier city developers, property agencies, tourism, consumer businesses (especially for the mass market), IT services, healthcare, new energy, and cement, as well as adopters of Western methods, such as retailers and banks,” she said.
"The objective of China’s 12th Five-Year Plan is to shift the country’s economic emphasis from exports and investment towards consumption, and from urban and coastal growth towards rural and inland development,” said Joseph Tse, Portfolio Manager for Fidelity’s Greater China Fund.
“The priority of the Plan is to create a harmonious environment for sustainable growth by addressing more equitable wealth distribution, expanding domestic consumption and improving social safety nets. The consumption theme in China offers a huge growth potential for investors. Many positions in the Greater China Fund portfolio stand to benefit from the rising consumerism and lifestyle changes under way in the country,” he added.
“As China continues to pursue structural reform to ensure sustainable economic growth, the focus of China’s 12th Five-Year Plan is likely to centre on pro-consumption policies to stimulate domestic consumption, as well as improving quality of growth versus quantity,” said Stephen Ma, Portfolio Manager for Fidelity Funds - China Opportunities Fund.
“Important themes in the government’s policy pipeline surround industrial upgrades, with the creation of new sectors, such as alternative energy, environmentally-friendly chemicals and materials, as well as industries that focus 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 precision engineering, are prime examples of initiatives that are likely to dominate the government’s agenda,” Mr Ma explained.
Fidelity’s team of China experts said there are seven key themes in the 12th FYP that are likely to define China’s growth map and influence investment decisions going forward:
- Promoting consumption growth.
- Property market reform and social housing.
- Healthcare and pensions reforms.
- Urbanization and rural reforms.
- Renewable energy/green economy
- Private sector/strategic industry development.
- Financial and fiscal reforms.
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