China: Cometh The Man
Xi Jinping is president for life, if he wants the job. In our latest Asianomics Country Report, China: Cometh The Man, Dr John Lee of Washington's Hudson Institute and our regular China political commentator, takes a look at developments in the Communist Party leadership and what it means for the next five years and beyond. If China is ready for a new Mao Zedong, Mr Xi seems ready to step up to the plate.As part of the package, we can forget a period of liberalisation and market reform of the preferred Western (Washington Consensus) variety. Mr Xi is all about strengthening Party control over the economy and establishing Chinese corporate champions. Our question is, can he achieve these goals given where China is in the economic cycle. Tentatively, the answer is yes. Our indicators for Chinese economic activity and our Austrian stress indicators suggest that the economy is in the early stages of a new business cycle that will enable Mr Xi to reach his goals of absolute poverty eradication by 2020 and a doubling of per capita GDP to US$10,000 by 2021.
There is still a fine balancing act to be performed in the economy but if we are right in assessing the growth momentum as being positive for the next few years, debt servicing and bad debt write-off will be facilitated in the near term at least. We maintain our overweight position in Chinese equities and fixed income. Buy into the current volatility.
Best for now
Jim
Asianomics, founded by Dr Jim Walker in 2007 and based in Hong Kong, specialises in economic analysis research, cross-referencing their work with credit cycles, profit cycles and cash flows. Asianomics focus is on developments in the Asia-Pacific region, and they also cover developed markets like the US and Europe.
The Austrian Economics model provides a framework for the economic research. The basis of the School of Austrian Economics is that economies work more efficiently and effectively when companies and individuals are free from excessive interference by government and special interest groups. The Asianomics economic research team includes Deputy Chief Economist Sharmila Whelan who is recognised for non-consensus thinking and her depth and quality of primary research, and Chief Economist Dr. Jim Walker.
Asianomics’ subscribers have access to regular economic commentary, stand-alone Country Reports, Special Reports and Investment Strategy Reports. Dr. Jim Walker also provides weekly webcasts.
Dr. Jim Walker is regarded as one of Asia’s leading economists. Prior to setting up Asianomics, he was the Chief Economist at CLSA Asia-Pacific Markets, where he worked for more than 16 years. He has achieved numerous ‘Best Economist’ rankings in the Asiamoney, Institutional Investor and Greenwich surveys of fund managers.
Previous successful calls include:
- In 1995 Dr. Jim Walker wrote about the prospect of Asia being forced off its de facto dollar peg “within the next two-three years”. The Asian Crisis, precipitated by the Thai baht devaluation, began in July 1997.
- Forecasted the US 2007 downturn and financial sector meltdown in series of ‘Apocalypse’ reports.
- Called early the upswing in the Indian stock market in the final quarter of 2013.
Recent Recommendations:
- Overweight China - We are overweight Chinese equities with momentum improvement in the economy.
- Short Sterling, Long Renminbi - China’s currency offers good upside with a positive carry.
- Short European Financials, Long Indian Financials - This is the simplest pair trade to play superior demographics and growth in Asia relative to the region with the biggest problems.
- Long EM Asia, Short Developed countries - South and SE Asia, and direct investors from North Asia, are ‘buy and hold’ investment bets.
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