context: Amid slowing global growth, PRC experts warn the country faces a tougher transition marked by real-estate fragility and geopolitical frictions. Rising tensions are pushing firms to factor in policy risks on top of economic considerations, narrowing profit margins. This shift could slow Beijing’s drive for high-tech upgrading and advanced-manufacturing exports.
Lu Zhengwei 鲁政委 Industrial Bank chief economist and Chen Fei 陈飞 Shifu Capital (China–Central and Eastern Europe Fund) vice chair share insights on the current global trade environment
- global economy is shifting from efficiency-led to one based on weighing risks
- it is experiencing a downturn
- the potential of older technologies has been exhausted while new ones have yet to mature
- shifts focus from multilateral cooperation to zero-sum thinking
- it is experiencing a downturn
- Chen described this shift as ‘compensatory investment based on security concerns’
- e.g. Huawei once showed the ideal of ‘high quality and low cost’ in global markets
- chip cut-offs and operating-system restrictions abruptly broke its supply chain
- corporate costs are rising as firms move to secure critical inputs independently
- e.g. Huawei once showed the ideal of ‘high quality and low cost’ in global markets
- declined trust in the dollar system
- global central-bank gold holdings have surpassed holdings of US treasuries
- growing strategic ‘doubt’ regarding the reliability of the US
- the US now relies more on power politics than rules-based cooperation
- multilateralism gives way to bilateral bargaining
- growing strategic ‘doubt’ regarding the reliability of the US
- global central-bank gold holdings have surpassed holdings of US treasuries
Lu Ting 陆挺 Nomura Securities China chief economist discusses the current economic pressures
- PRC export outlook
- grew nearly 8 percent annually over the past five years
- export growth during the 15th 5-year plan is expected to fall to three to five percent
- previous growth was driven by pandemic disruptions, inflation in Western economies and supply-chain shortages
- structural slowdown expected as global conditions return to normal
- grew nearly 8 percent annually over the past five years
- real-estate legacy pressures
- real estate still accounts for half of residents’ wealth
- deeply tied to public finance and infrastructure construction
- collapse of real estate sector risks a debt-chain contagion
- hinder the development of new industries
- fiscal policy is focusing on clearing legacy debt rather than large stimulus
- equity-market activity has limited impact on the real economy due to lower commission and modest financing volumes
- resolving debt tied to real estate will take a long period of deleveraging and restructuring
- real estate still accounts for half of residents’ wealth
Dan Bin 但斌 Shenzhen Dongfang Harbor Investment Management chair and Su Dong 苏东 Walden International partner analyse investors’ new strategies
- AI-driven investment strategy
- investors to choose between paying high premiums for security or betting on transformative technologies
- Dan advised focusing on yield-generating technology assets rather than those without cash flow
- AI-based evaluation standard is reshaping primary market investments
- M&A deals are no longer about gaining scale
- investors now favour companies with AI-driven capabilities or resilience against AI disruption
- M&A deals are no longer about gaining scale
- investors to choose between paying high premiums for security or betting on transformative technologies
Rui Meng 芮萌 China Europe International Business School associate dean discusses wealth transfer risk in PRC firms
- about three million family businesses face succession in the next five to ten years
- patterns indicate weak transfer of entrepreneurial skill across generations
- these firms could struggle to survive the transition without better institutional planning
- threatening PRC economic stability