MacroResearchBoard

Don’t Short China – July 12, 2021

Concerns that China will create problems for the global economy have become chronic in the past decade or so. The recent moderation in Chinese economic growth, after a relatively more muted pandemic slump/recovery, is starting to generate some angst. Moreover, the ongoing regulatory attack on select high-flying mega-cap tech shares in China is adding to concerns.
A just-published report examined the outlook for the Chinese economy, policy and asset markets, and concluded:

• The economic emergency is over, and economic policies are returning to normal.
• China’s domestic demand will continue to provide solid support for the global economic expansion, driven primarily by consumption.
• Renewed worries over antitrust measures aimed at internet stocks are temporary in nature, and do not threaten the cyclical advance of either stock prices or domestic demand.
• Stay overweight China within an EM equity portfolio. Stay neutral on the currency and yuan-bonds within their respective EM portfolios.