Handelsbanken Wealth & Asset Management: “Is China turning a corner?”

Date: 25 Jan 2023

Vicente Luckina Bunn

Handelsbanken Wealth & Asset Management provides a brief history of China, its challenges in recent years and what the reopening means for the global economy.

Since Chairman Mao proclaimed the People’s Republic of China in 1949, the nation has been on a journey to reclaiming its role as a dominant force on the world stage. In the COVID-19 era, China has faced stark new challenges, emerging as both the starting point of the virus as well as the strictest enforcer of related population controls, with travel restrictions in and out of the country finally easing in recent days. Against this complex backdrop, Chinese financial assets have been on a wild ride in recent history. But are things beginning to change?

Jaisal Pastakia, Investment Director at Handelsbanken Wealth & Asset Management describes China’s reopening as ‘welcome news for the global investment community’ and discusses whether Chinese financial assets a good bet.

Over the past few decades, China has played a pivotal role in the ‘globalisation’ of supply chains around the world. Thanks to its capacity for cheap, large-scale manufacturing, China emerged as a key exporter, earning the nickname ‘the world’s factory floor’.

In 2022, the President Xi Jinping reshuffled the Communist Party’s leadership, replacing a number of senior figures with party members reported to be personally loyal to him. Financial markets appeared to react very badly to this news too, although investors may also have been responding to unfounded hopes that Xi’s announcement would also contain news of COVID-19 easing (which ultimately came later). The price of Chinese financial assets fell quickly, and businesses with a substantial proportion of international shareholders (such as ecommerce giant Alibaba) were especially hard hit.

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