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Matthews Asia - Sinology

Matthews Asia is an independent investment management firm focused solely on investing in Asia. They specialise in actively managed, bottom-up portfolio management, with a focus on generating long-term investment performance.

The Great China Disconnect

“Give me a one-handed economist! All my economists say, ‘on one hand ... on the other.”

- U.S.President Harry S. Truman


The disconnect between weak market performance in China, on the one hand, and strong macro conditions and corporate earnings, on the other hand, is likely to narrow.


Key Points:


  • China remains the world’s best consumer story, and manufacturing is also healthy, which is why there hasn’t been significant stimulus.
  • The resolution of the U.S.- China trade dispute in the coming quarters is expected, but if it does escalate into a trade war, Beijing has the resources to mitigate the impact on its economy.
  • Industrial margins in the first eight months of this year are at the highest levels in eight years for the same period. The share of total credit coming from traditional bank lending has surged to more than 80%, up from 51% five years ago.
  • The short-term direction of U.S.– China relations is difficult to predict. However, there are a few key points to keep in mind. The Chinese economy is no longer export-driven, so the impact of a trade war with the U.S. would be modest. Much of the impact of Trump’s import taxes will not be borne by Chinese companies. About two-thirds of the largest exporting companies based in China are foreign-owned.



Learn more about the Matthews Asia - Asia Dividend Fund

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Learn more about the Matthews Asia - Japan Fund

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October 2018

Please note that these are the views of Andy Rothman, Investment Strategist , Matthews Asia and should not be interpreted as the views of RL360.

Author

Andy Rothman

Investment Strategist

Matthews Asia


October 2018

Please note that these are the views of Andy Rothman for Matthews Asia and should not be interpreted as the views of RL360.

360 fund links

A range of Matthews Asia funds can be accessed through our guided architecture products Oracle, Paragon, Quantum, Quantum Malaysia, LifePlan, LifePlan Lebanon, Protected Lifestyle Lebanon and Protected Lifestyle, and also through our PIMS portfolio bond.