Barings’ Global Head of Equities, Dr. Ghadir Cooper, assesses the transformation of China’s economy, and explains why investors should be encouraged by the country’s decisive policy actions.
China’s equity market may still be in the relatively nascent stages of opening up to the international community, but the monumental transformation of the country over the last four decades demonstrates that when change is implemented, it’s extensive, enduring and rapid. The changes are also extremely strategic; China has shown that when the nation faces challenges, the ensuing policies are implemented with strategic focus and agility. From an investor’s perspective, it’s therefore of paramount importance to be fully aware of the implications of these policies in order to take advantage of opportunities when they arise, while also navigating risks.
Where China is Today
Today, China’s ‘socialist’ market economy, where the public sector accounts for the largest share of GDP, is now the world’s second-largest in nominal GDP terms. More pertinently, it is the largest in purchasing power parity (PPP) terms, which accounts for the relative standard of living. China remains the world’s largest manufacturing economy and exporter of goods, in addition to being the largest trading nation on the planet. This was greatly assisted by the country’s admission to the World Trade Organization in 2001, which enabled free trade agreements with many countries, including the Association of Southeast Asian Nations (ASEAN) and Australia.
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