The Middle Kingdom’s inexorable rise is not over yet – now’s the time to snap up some stocks
Matthew Lynn City columnist
Tech stocks did well. So did luxury-goods companies, and even some of the emerging markets. But China was a graveyard for investors over the last year. A mere $6bn of Chinese stocks were bought by foreigners in 2023, compared with more than $50bn in 2021. It is even more unpopular than London’s FTSE 100. No one wants anything to do with the Shanghai, Shenzhen or Hong Kong markets. The CSI index, which covers the 300 largest firms traded in Shanghai and Shenzhen, fell by 11% last year, following losses of 22% in 2022, and 5% in 2021. Three straight years of declines is a record for the Chinese market. The new year didn’t start any better, with Chinese stocks recording their worst opening week for 21 years. Emerging markets are always volatile, but that is a shockingly bad result.
Run against the crowd
It is not hard to understand why. After 20 years of rapid growth, the Chinese economy faces some real challenges. Far too much money was sunk into huge building projects, many of which are now empty. The government has been spending vast sums of money on its global Belt and Road infrastructure links, but it may well never make a meaningful return on those. The country was locked down in pursuit of a “zero-covid” policy, and when it finally reopened last year it struggled to bounce back as quickly as was forecast. The US has started imposing tough sanctions on microchip exports, making it harder to keep up in advanced technologies. Perhaps worst of all, the Communist Party has been reasserting control over the financial system, and over the country’s leading tech companies, meddling with management decisions, and even installing party officials within companies to maintain discipline.
No one would deny that China faces plenty of challenges, just like any major economy. And yet, a good rule for the financial markets is that when everyone has got out it is about to turn. When you look a little more closely, China is still bubbling with economic vitality. It is starting to move into higher-tech industries, with the launch last year of the first domestically built plane, the C-919. It will soon be a major force in aerospace, supplying much of its own market, and also muscling out Boeing and Airbus in global markets, especially in the countries where China is a major donor. This m
