Last year, China’s slowdown was seen as the biggest risk for global markets. The country’s economic slowdown was amplified by its trade dispute with the United States (SPY). However, China undertook a slew of measures—including tax cuts and going slow on deleveraging—to boost its economy.
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As a result of these measures, we’ve started to see some signs of bottoming out in China (FXI). While automotive sales have been a weak spot with sales down year-over-year in the first three months of the year, some indicators show growth. China’s March exports were better than expected. The manufacturing PMI also showed expansion. Chinese equity markets have also rebounded this year after last year’s sell-off. Leading Chinese stocks (TCEHY) Alibaba (BABA), Baidu (BIDU), and JD.com (JD) have gained 33.6%, 6.4%, and 41.7%, respectively, this year. However, NIO (NIO)—hailed as China’s Tesla (TSLA)—has lost 25.4% year-to-date.
While J.P. Morgan expects modest returns from Chinese markets this year, some analysts have more sanguine views. According to Stefan Hofer, chief investment strategist at LGT Bank, China seems to have avoided a “hard landing.” He added, “And if you do have that U.S.-China trade deal that we’re expecting, which is a higher quality one, then investor sentiment in China is going to go through the roof and it should be relatively clear sailing.”
Over the last couple of weeks, several agencies—including the IMF—have raised China’s growth forecasts. HSBC expects China to grow at 6.6% this year while Citi sees “upside risks” to its forecast of 6.2% growth. Check out China’s Growth Could Surprise on the Upside This Year for more information