China Remains One Of The Key Global Growth Engines – April 12, 2021

A just-published report updated our outlook for the Chinese economy and capital markets. The message was upbeat, with the economy both strengthening and broadening. The expansion is on track to exceed the prior cycle both in terms of amplitude and length. Chinese imports are growing strongly, particularly for non-commodity items, which is boosting global trade and, thus, the overall global economic outlook.

Our investment conclusions were:

  • Remain overweight China within an EM equity portfolio.
  • Chinese government bonds will deliver positive absolute returns and outperform G7 bonds, especially U.S. Treasurys. However, they will underperform EM local currency-denominated bonds.
  • Stay neutral on the yuan within an EM currency basket on a 6-12 month view (which implies staying overweight the yuan versus the U.S. dollar). In the longer term, the process of its internationalization is well in train.


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