Skip to main content
logo
  • Insights

    Liquidity Insights

    • Liquidity Insights Overview
    • Audio Commentaries
    • Case Studies
    • Leveraging the Power of Cash Segmentation
    • Cash Investment Policy Statement
    • China Money Market Resource Centre

    Market Insights

    • Market Insights Overview
    • Eye on the Market
    • Guide to the Markets
    • Market Updates
    • Guide to China

    Portfolio Insights

    • Portfolio Insights Overview
    • Currency
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Sustainable Investing
    • Strategic Investment Advisory Group
  • Resources
    • MORGAN MONEY
    • Global Liquidity Investment Academy
    • Account Management & Trading
    • Multimedia
    • Announcements
  • About us
  • Contact us
  • English
  • Role
  • Country
  • MORGAN MONEY LOGIN
    Search
    Search
    Menu
    You are about to leave the site Close
    J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
    CONTINUE Go Back
    • LinkedIn Twitter Facebook Line
    02/02/2022
    What to expect in China from the Year of the Tiger?
    • Gabriela Santos
    • James Sutton
      James Sutton

    2021 was a year of steady reform introduction by Chinese authorities, focused on the long-term goals of improving the quality of growth and on addressing non-economic priorities like inequality, leverage, and decarbonization.

    Gabriela Santos

    Global Market Strategist

    Listen to On the Minds of Investors

    02/02/2022

    February 1st marked the start of the Year of the Tiger in the Chinese lunar calendar. This follows the Year of the Ox, associated with characteristics of hard work and pragmatism. 2021 was a year of steady reform introduction by Chinese authorities, focused on the long-term goals of improving the quality of growth and on addressing non-economic priorities like inequality, leverage, and decarbonization. While in many ways logical for the long-term, in the short-term, reforms may generate uncertainty which may cause economic deceleration and market volatility. The Tiger zodiac sign is associated with quick change, unpredictability – and also the potential for positive surprises. What should investors expect from China during the Year of the Tiger?

     

    1. Aiming for a floor on growth: In the second half of 2021, GDP growth shifted down from 7.9% year-over-year in 2Q to 4.0% in 4Q. This year’s focus is economic stability, with at least 5% GDP growth likely desired (consistent with the goal of doubling GDP-per-capita by 2035). Previously announced reforms are unlikely to be rolled back, but clearer communication and more vigilant implementation is expected.

    2. Marching to its own monetary policy beat: While the rest of the world reduces monetary accommodation, China is aiming to increase it. Credit impulse will likely turn neutral from restrictive, as policymakers have cut reserve requirements for banks, cut key policy rates, boosted targets for lending to priority areas, and frontloaded fiscal expenditures.

    3. Swimming against the tide with “zero tolerance” COVID approach: China is unlikely to shift gears in its approach to the pandemic, remaining the sole major country to continue restricting mobility and activity at the appearance of local cases of the virus. The arrival of the Omicron variant in China presents the risk of more nationalized lockdowns.

    4. More outperformance from fixed income, potential positive surprises from equities: In 2021, Chinese 10-year government bond yields fell 34bps while global yields moved up 40 bps, leaving Chinese government bonds one of the best performing bond markets in the world (up 6.6%). So far, this year has been a repeat given China’s easing versus global tightening. Historically, Chinese equities have rebounded fast and strong after an over 30% correction like last year, up 28% 26 months after a trough (on average from 2011-2021). This would turn Chinese equities from a big drag to a big boost in portfolios.

    5. How to invest in Chinese equities to remain much more nuanced: The recent wave of regulatory interventions and accelerated drive for self-sufficiency have led us to reappraise how we best capture the China opportunity.

    • China’s consumer internet sector has been the main target of increased measures with new laws addressing anti-competitive behavior, labor rights in the gig economy and data security. Companies like Alibaba and Tencent are also being encouraged to dial back the monetization of their platforms and invest in social initiatives. The stocks have materially de-rated with Alibaba now on 13x forward price to earnings vs 29x in August 2020. But investors must ask what the right multiple is for a business whose management cannot allocate capital without the government’s implicit approval?

    • Of course, it is possible to invest in alignment with Beijing’s strategic policy objectives. Those objectives include: semiconductor self-sufficiency, carbon neutrality and greater industrial automation. Not only are companies in these areas likely to stay out of the regulatory crosshairs, they could actively benefit from government subsidies and tax breaks. We do see good potential for domestic companies within the EV supply chain, where China is emerging as a global leader in battery cell manufacture; also enterprise software, which is very underpenetrated relative to the US and where the government wants to displace western companies like SAP and Oracle.

    • Paradoxically, the area where China is making the biggest push for self-sufficiency, in semiconductors, is also the area where they are most likely to remain behind. Given the starting point and US efforts to restrict access to key technologies, international companies will likely retain their edge over any investable horizon. 

    China's self-sufficiency in key new technologies varies by barriers to entry
    Current self-sufficiency rate amongst different technology products, percentage pointsA chart showing China's self-sufficiency in key new technologies varies by barriers to entry.
    Source: J.P. Morgan Asset Management. ERP= Enterprise resource planning; IaaS = Infrastructure as a Service; IC= Integrated circuit; PCB = Printed circuit board; RF IC = Radio frequency integrated circuit. Based  on J.P. Morgan Asset Management’s estimates as of January 31, 2021. Forecasts, projections and other forward looking statements are based upon current beliefs and expectations. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated. Guide to China. Data are as of October 31, 2021.
     

    The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.
     
    09pd220102131614       

    EXPLORE MORE

    On the Minds of Investors

    What investment questions are on the minds of investors? Explore the questions investors ask frequently and find answers at J.P. Morgan Asset Management.

    Read more

    Guide to the Markets

    The J.P. Morgan Guide to the Markets illustrates a comprehensive array of market and economic histories, trends and statistics through clear charts and graphs.

    Read more

    The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions. 

    For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.

    This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

    J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

    To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy.

    This communication is issued by the following entities:

    In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be. In Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only.

    For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.

    Copyright 2023 JPMorgan Chase & Co. All rights reserved.

    • China
    • Growth
    J.P. Morgan Asset Management

    • Investment stewardship
    • About us
    • Contact us
    • Privacy policy
    • Cookie policy
    • Complaint Resolution
    • Binding corporate rules
    • Sitemap
    Decorative
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    READ IMPORTANT LEGAL INFORMATION. CLICK HERE >

    The value of investments may go down as well as up and investors may not get back the full amount invested.

    Copyright 2023 JPMorgan Chase & Co. All rights reserved.