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Why investors should stick with China despite the trade war
Why investors should stick with China despite the trade war
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Why investors should stick with China despite the trade war

25/07/2019

It is approaching one year since the trade tensions between the United States and China began, and there is still no clear end in sight. The uncertainty and volatility caused by tariffs has led to concerns about whether China’s economy can get through or whether it faces a recession.

Over the past 12 months, China’s leadership has repeatedly reiterated its commitment to removing market barriers. For example, at a meeting with foreign chief executives in Beijing in June, Premier Li Keqiang said that China will “relax (restrictions on) access to even more fields to create a market-oriented, law-based internationalised business environment.1”

Meanwhile, plans have also been announced to revise the Qualified Foreign Institutional Investor scheme (QFII) and its renminbi equivalent (RQFII) to improve overseas access to Chinese capital markets. This change is in addition to recent reforms to the Stock- and Bond Connect channels that have allowed A-shares and Chinese bonds to be included in major investment indices.

And while some market participants have expressed concern that China will reverse some of these reforms if it continues to face pressure over trade, the opposite may be true according to Jason Lui, Head of Equity and Derivative Strategy for Asia Pacific at BNP Paribas. China will keep improving market access for foreign investors to offset the impact of the trade war, he explains…

"From a balance of payment standpoint, Chinese policymakers are fully aware of the structural shift in the current account balance due to the trade tensions and they are committed to attracting more foreign capital to compensate while promoting the internationalisation of the Renminbi"

Jason Lui, Head of Equity and Derivative Strategy for Asia Pacific at BNP Paribas

 

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