China’s global economic influence is therefore unquestionable. It has become such a vital part of global markets and our global economy that it should represent a sizable allocation in a well-balanced global portfolio.
It would also be fair to say that simply getting rich in China is not as glorious as it was during Deng Xiaopeng’s time. China’s evolution has led it to a point where the leadership’s agenda emphasizes a path to common prosperity, seeking to realign the existing balance between growth and a more expansive social agenda.
Geopolitical considerations remain an issue to keep an eye on, and while its regulatory landscape continues to evolve, China’s long-term narrative remains intact. The country’s physical, social, cultural and economic influence will shape the future world we live in.
China’s economic prowess should prove enduring
For decades, China has provided the world with cheap high-quality consumer goods. China itself also has over a billion consumers who are eager to spend on fashion, gadgets and properties. Its emerging middle class aspires to the same high quality of living experienced in developed markets. Consequently, tastes and fashions are changing, favoring more protein-rich diets and consumer goods.
The short term, however, remains beset by uncertainty over the direction of the pandemic. It remains to be seen whether and to what extent lockdowns will be reintroduced. But this need not lead to drastically negative economic impacts. The continuation or even tightening of restrictions should generate still more pent-up demand. Coupled with the build-up in global savings resulting from previous lockdowns, we are likely to see a significant post-pandemic increase in demand for China’s manufactured goods.
Hints of what may come have been seen following the recent period of relative calm resulting from vaccination campaigns. China’s retail sector, for instance, has recorded a sharp uptick, with online retail sales growing 12.1% year-on-year as of June 2021.3
The country continues to break through new barriers
China’s stock market value has hit USD 10 tn.4 The country has more than 850 million internet users as of Q1 2021, more than anywhere in the world.5 The World Bank projects that China will experience 8.5% real GDP growth in 2021, followed by 5.4% in 2022 and 5.3% in 2023. China could overtake the US and become the world’s largest economy by as early as 2028.6
In fact, there are many reasons to be bullish about China over the long term. China’s economy has fared well throughout the pandemic. Its factories reopened earlier than anywhere else in the world, giving it a first-mover advantage. While much of the world remained in lockdown, China was able to supply medical and computer equipment, which were in high demand particularly at the apex of the pandemic.
China’s economy has become large and diverse. Its rapid development is being powered by a myriad of sectors and drivers. China has a large middle class that is still growing and contributing positively to private consumption.