China – economy’s evolution creates new opportunities for investors

Key points

• China’s economic slowdown is simply a move to a more sustainable level and we don’t expect a hard landing
• Domestic demand is increasing, fuelled by wage hikes, urbanisation and a widening of retail networks
• The shift from an export-led to a domestic demand-led economy is a more balanced model
• Property price rises are not a cause for concern as household debt remains low, employment rates high and demand outstrips supply 
• We are optimistic about China’s long term economic outlook given looser monetary policy, financial sector reforms and compelling equity valuations
• Stock picking will be essential to maximise returns; we favour companies which have proprietary technology, are exposed to domestic consumption, have strong franchises or generate strong cash flows.

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