Once Again Investors Are Misreading China – September 13, 2021

Pessimism towards China waxes and wanes over time, but recently has increased significantly. A just-published report examined the outlook for China in view of recent signs of slowing growth and ongoing regulatory turmoil. The report concluded that after a period of soft economic data in the near run, reflecting localized lockdowns that are now being relaxed, China should remain a solid source of global demand, as demonstrated in its ongoing strong import data.

Nevertheless, it could take time before angst about China recedes, especially since as the report noted: “China is in the midst of a dramatic policy shift towards income redistribution, whose first-line casualties are the prior winners of the monopoly-friendly regulatory regime of the past decade or two”. However, the main point for global investors is that China will remain a positive contributor to the global economic expansion.

In sum, investors have once again turned excessively pessimistic on China, creating room for positive surprises down the road. Stay tuned.


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