Is WPP’s Sir Martin Sorrell right to “remain a raging bull” in relation to Chinese growth?
Andy Rothman is investment strategist at Matthews Asia, says Yes
China’s stock market has experienced a significant correction, and Beijing engineered a minor devaluation of the RMB, but neither of these events reflect a worse-than-expected slowdown in the real economy, and there are no signs that the A-share correction is having a significant impact on consumer spending.
Many are proclaiming a China hard-landing.
The probability of this is, in my view, very low. Many analysts focus on the weakest parts of the economy – manufacturing and construction – while not understanding that the largest part of the economy – consumption and services – remains very healthy.
Although China is slowing, it is likely to remain one of the world’s fastest-growing economies, as well as the world’s best consumption story.
In the short run, Chinese equity indexes may be pummelled, but in the medium term China is likely to offer attractive opportunities at significantly lower valuations.
Gabriel Stein is director of asset management services at Oxford Economics, says No
If the issue were solely a stock market fall, rampant optimism might (depending on circumstances) make sense.
But the problem with China is not share prices so much as what their falls signify – that the economy is growing considerably slower than the official 7 per cent GDP number.
This was already clear thanks to the flurry of recent monetary and fiscal policy easing.
The share price fall, coming after attempts to prop up prices earlier in the summer, confirms that the authorities now understand that they cannot stop fundamental downward pressure on equities if the economy is rapidly weakening.
This is part of the wrenching shift towards an economy based on consumer demand, rather than investment and exports.
It means slower but more balanced growth in the future. China will still grow faster on average than many advanced economies and its shares will one day recover their attraction.
But not right now and not for some time.