Daily Spotlight

China 2021 Growth Forecast at 8%

Economic trends in China bear watching closely, and not just because the country appears to be a guiding light for other countries trying to emerge from the GDP-crushing grip of COVID-19. China is a $14 trillion economy and represents about 16% of the $86 trillion global economy. Thus, it is a critical contributor to overall global economic growth, even if it "only" grows 5%-6% per year. This year, global forecasters are expecting a rebound in growth to 8% -- among the fastest rates in the world. Investors in Chinese stocks are not celebrating, however, as the Chinese market is down more than 25% from highs earlier this year. In part, the sell-off is due to regulatory crackdowns in China (which has targeted entrepreneurial tech companies such as Didi) and in the U.S. (where Chinese companies will soon have to submit to more-rigorous financial audits). In addition, there is some concern among investors about Chinese monetary policy, which has been loosened to provide support for the economy. Over the long run, China is an important growth market, to which U.S. companies and investors want access on fair terms. We group China in the emerging markets segment of the equity asset class. In our asset-allocation models, we target 3%-5% exposure to this group. That can be achieved through regional ETFs, as well as through U.S.-based companies that depend on China for growth. ...  Investors in Chinese stocks are not celebrating, however, as the Chinese market is down more than 25% from highs earlier this year. In part, the sell-off is due to regulatory crackdowns in China (which has targeted entrepreneurial tech companies such as Didi) and in the U.S. (where Chinese companies will soon have to submit to more-rigorous financial audits). In addition, there is some concern among investors about Chinese monetary policy, which has been loosened to provide support for the economy. Over the long run, China is an important growth market, to which U.S. companies and investors want access on fair terms. We group China in the emerging markets segment of the equity asset class. In our asset-allocation models, we target 3%-5% exposure to this group. That can be achieved through regional ETFs, as well as through U.S.-based companies that depend on China for growth.   more

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