60 seconds with Rajeev De Mello on the China conundrum
Market volatility exposed investors’ unease over China’s slowdown, but Rajeev De Mello says the country’s growth is stabilising and investors must choose the right assets for a gradual recovery.
China's economy has been slowing down over the last couple of years and there is a lot of concern in markets right now about how much the country will slow and at what rate growth will finally stabilise.
In the meantime, we’ve seen China take policy action, through:
- Cutting interest rates.
- Boosting fiscal spending.
- Attempting to arrest the decline in property prices.
Although we have seen policy support, there is still a lack of confidence among domestic as well as foreign investors.
Asset class selection
One of the big worries right now surrounds the currency, as domestic investors are taking their money out of the Chinese local currency, the renminbi, and investing in dollars.
There have been high levels of volatility in the equity market too, which has less impact on Chinese growth, but adds to the policymaker’s difficulties.
We do think that Chinese growth is stabilising, but it will be very gradual process and investors will have to choose the asset classes that will cope with a gradual recovery.