Guide to China 2Q 2022
The Year of the Tiger was expected to be a year of stabilization for China's economy and of recovery for its equity market, following last year's tough Year of the Ox. However, instead of positive surprises, investors have continued to grapple with uncertainties, both new and old. The arrival of the Omicron variant in China has caused its economy to slow further over the past two months and has pushed its equity market and currency lower. In addition, investors remain on edge about the introduction of further regulations, leaving them on the sidelines despite discounted valuations. Developments in China over the next few months will be crucial for its local economy and markets, as well as the global landscape.
- Will China be successful in balancing "COVID zero" and economic stability?
- Will Chinese policy makers insert further monetary and fiscal stimulus into the economy?
- Will global supply chains be disrupted by rolling lockdowns in China?
- Can Chinese policy makers inject confidence back into its equity and credit markets after over a year of regulations and reforms?
- Does investing in Chinese fixed income still make sense given lower interest rate differentials?
- Do the rewards for investing in China outweigh the risks? And if so, how big should the China allocation be?