BNY Mellon IM: Commentary by Lale Akoner on China's GDP figures

BNY Mellon IM: Commentary by Lale Akoner on China's GDP figures

16 april 2021

China

This is a commentary by ale Akoner, Market Strategist at BNY Mellon Investment Management, on China's GPD figures.

  • China’s strong V-shaped recovery in 2020 was largely due to higher investment with lag in consumption and services. Recent Q1 2021 numbers reflect the effect of policy normalization on domestic growth: credit-sensitive investment activity disappointed (due to lower credit and tighter housing policies) but there is a sequential rebound in consumption.  We expect recovery in consumption and services to continue thanks to higher incomes, better labor market conditions, and draw-down of 2020’s excess savings. We also expect China’s policy tightening bias to remain to mitigate risks in the financial and real estate sectors. 
  • Investment recommendations: Investors are advised to tap into sectors that will likely benefit from further improvement in consumption and services sectors. We are looking for attractive opportunities that lie in the intersection of two trends: 1. A permanent change in consumer behavior due to the pandemic, i.e. digitalization. 2.China’s long-term strategic high-quality consumption-focused growth mandate. Hence, we look at opportunities in e-commerce, healthcare, online-gaming, education businesses, internet stocks. For fixed income, we think Chinese bonds will continue to attract high foreign investor demand, offering favorable yields. 

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