We are in the middle of the year as the world opens up, and investors are indeed on the lookout for markets that will grow with a booming economy. And one such market that many investors should watch is China.
As an economic powerhouse, China will continue to play an important role in the global marketplace as it begins to position itself for economic recovery and strong growth.
We review economic data from China and discuss key policies and measures based on expert advice from Principal Asset Management.
What are the signs pointing to China’s recovery?
Based on data compiled by the World Bank from 2011 to 2021, China’s economic performance has consistently remained at around 5% GDP growth, peaking at 9.55% in 2011.
China, United Kingdom, United States, Japan 2011 – 2021 GDP Source: World Bank. Disclaimer: Please note that past performance is never a guarantee of future returns.
In 2021, however, China recorded GDP growth of 8.1%, the fastest the country has seen in 10 years. China’s GDP growth is exceeding market expectations, narrowing the gap with the United States, and could eventually overtake the United States by 2028.
This acceleration in growth, which exceeded the government’s target of 6.6 percent, further strengthens China’s position as the world’s second-largest economy and lays the foundation for a steady economic recovery.
Here’s what you need to know about China’s investment outlook
While rising GDP boosts investor confidence in China, it is the key market ‘significant’ that investors should be aware of that points the country’s path to economic recovery.
From the ease of Covid restrictions in Beijing and Shanghai to the recent PMI performance in June, the country has begun to lay the groundwork for stronger economic performance in 2022 and beyond.
Principal’s experts have highlighted the following 5 key signs to watch for in terms of China’s investment prospects.
Point 1: Positive GDP performance even during the pandemic
In 2020, most major economies were reeling from the effects of the pandemic, with countries like Japan, the United States and the United Kingdom all recording negative GDP growth rates.
China, however, was able to record a positive GDP growth rate of 2.3% in 2020 and was the only major global economy to do so at the height of the pandemic.
Thanks in part to its rapid and sustained response to the coronavirus, China has still been able to grow economically and is expected to continue the trend with economic growth of 4% in 2022.
Point 2: Effective control and prevention of Covid epidemics
The constant restriction imposed by the government on Covid outbreaks has been the main factor why foreign investors are wary of investing in China. Shanghai’s two-month lockdown and other Covid-related restrictions caused the total number of investment deals to drop 29% from a year ago.
Since then, the government has started easing its Covid restrictions and lockdown policies to bring foreign investors back into the Chinese market. This, coupled with the reduction of the quarantine period to one week, has brought a much-needed boost to the country as well as an opportunity for it to move beyond the “Zero-Covid” policy.
Point 3: Government measures to stabilize the economy
In addition to the easing of Covid restrictions, China has also introduced economic stimulus packages which are expected to boost growth and lead to a major rebound in the economy.
The 33 detailed policy measures cover six major areas such as fiscal and monetary support, stabilization of investments, promotion of consumption, food and energy security, as well as stabilization of the supply chain.
Point 4: A strong rebound in the PMI and beyond market expectations
An indication that could point to the Chinese market’s recovery comes from the recent performance of its Purchasing Managers’ Index (PMI) which saw its fastest growth in almost a year in June 2022, after the easing of the Covid restrictions.
Understand the PMI and its importance
The Purchasing Managers Index, more commonly known as the PMI, is an index used to determine the prevailing directions of economic trends in the manufacturing and service sectors.
Through the PMI, you can get valuable insights into the state of a country’s economy in general and its manufacturing sectors.
The non-manufacturing/services PMI rose to 54.7 points in June, the fastest growth since July last year, while the manufacturing PMI jumped to 50.2 points.
Strong rebounds in the non-manufacturing PMI indicate rising demand in areas such as retail and trucking, while the rise in the manufacturing PMI highlights the country’s manufacturing activity which is experiencing its fastest growth in 13 months.
Point 5: Renewable energy initiatives are working
Over the past decade, China has set ambitious targets for renewable energy. In its previous five-year plan (2016-2020), the country set a target to source more than a third of its energy sources from non-fossil fuel sources.
Today, it is the largest producer of wind and solar energy in the world. In 2020, more than half of the energy used for its national grid already comes from renewable sources. China also plans to increase its use of renewable energy sources by up to 33% by 2025.
According to Principal, there are opportunities to benefit from China’s move towards decarbonization, as well as government investments in reopening the country with policy easing and fiscal stimulus.
Investing in China’s current recovery and future growth with Principal
If you are ready to invest in China, you can invest with EPF savings (diversifying your exposure to China) or use cash. With Principal, you can invest as little as RM1,000 using EPF (or RM500 with cash) and gain exposure to the top-rated stocks in China:
|Fund name||Main holdings|
|Principal Greater China Equity Fund||– Tencent Holdings Ltd.|
-Alibaba Group Holding Ltd
– Taiwan Semiconductor Manufacturing Co Ltd
– AIA Group Ltd
|– YTO Express Group Co Ltd ORD|
– Food Group Co Ltd ORD
– RS Macalline ORD
– Minmetals Capital Co Ltd ORD
|Grand Bay Main Fund||– Tencent Holdings Ltd ORD|
– AIA Group Ltd ORD
– BYD Co Ltd – AORD
– China Merchants Bank Co Ltd ORD
|Top Asia-Pacific Islamic Dynamic Stocks||– Samsung Electronics Co.Ltd|
– Reliance Industries Ltd
– Semiconductor manufacturing in Taiwan
-Alibaba Group Holding Ltd
– Tencent Holding Ltd.
|Main dynamic growth in Asia-Pacific||– Taiwan Semiconductor Manufacturing ORD|
– Tencent Holdings Ltd ORD
-Alibaba Group Holding Ltd ORD
– LONGi ORD green power technology
*The securities listed do not constitute a recommendation to buy or sell any particular security. Cash and/or derivative positions that are not part of the core investment strategy will not be reflected in the list of top holdings.
Grab the dragon with Principal and get rewarded up to 0.88%!
Ready to invest in China? Seize the opportunity to invest in China and earn rewards at the same time!
To enjoy the rewards, simply register during the promotion period listed below:
|Registration period||Reward by total net investment amount||Reward for new investors|
|July 20 – August 7, 2022 (Early Bird Offer)||Reward from 0.18% to 0.88%|
with a additional 0.18% the total amount of your net investment
|A welcome reward of RM30 TNGD eWallet credit|
|August 8 – September 8, 2022||Reward from 0.18% to 0.88% |
the total amount of your net investment
See promotion details here: https://www.principal.com.my/en/offer/invest-in-china
You can easily register in 4 simple steps to start investing:
- Register on the site
- Verify Your Identity
- Create your account
- Start investing on the Principal Online Investment Portal
Or you can contact Principal Asset Management or visit their website here to learn more about the rewards and how to sign up!
You are advised to read and understand the Prospectus, Information Memorandum and/or Information Document, including any supplements thereto and the Product Sheet (if any) before investing. A copy of the said documents has been filed with the Securities Commission Malaysia (SC) and may be obtained from our offices, our distributors or our website at [www.principal.com.my]. The registration of these materials does not imply or indicate that SC has recommended or endorsed this product or service. The issue of any unit to which such documents relate will only be made upon receipt of a request referred to in and accompanying a copy of the relevant Prospectus, Information Memorandum and/or Information Document. Investing involves risks and costs. You should understand the risks involved, compare and consider the fees, charges and costs involved, make your own risk assessment and seek professional advice, if necessary.
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