Andrew Swan, the manager of the BlackRock Asia Fund, was recently quoted by FE Trustnet as saying the reforms transitioning China from a high-growth and export-led economy to one with a greater focus on domestic consumption has lowered expectations but these reforms should help returns grow in coming years:
“The Chinese economy is in a multi-year slowing phase of economic growth and there are a number of issues, many self-imposed, for example the corruption crackdown, which have slowed activity further in the short term and worried some commentators. This slowdown, however, should be looked at in a long-term context and we should recognise the fact that the denominator is growing to such a scale that a reduction in the rate of growth is inevitable… I am therefore not excessively worried about the absolute fact that economic numbers are slowing but focus far more on the consistency and management of the slowdown to judge the government’s success.”
Swan believes the reforms will be a painful transition in China, but this transition will result in positive long-term returns:
“Corruption is a blight on the economy and needs to be reduced and other reform measures, too, for example stock market and ‘hukou’ reform are positive developments for the long term. On these, I continue to be encouraged by the rate of change. Examples like the stock market reform show good intent and a sense of urgency from the government which will help set the economy up for its next stage of rebalanced growth.”
He also added:
“Beyond China, I also continue to believe that governments around the region retain good scope to manage their economies through the turmoil of global economics. Oil price falls in particular have created a window for governments in India, Indonesia and Thailand to step away from expensive subsidy regimes which sets them up far better for the future, and releases funding for much needed infrastructure development, the cost of which has also fallen.”
To read the whole article, The market that the experts are backing over the US for 2015, go to the website of FE Trustnet.
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