Where to find investment prospects in China

Even though China’s growth prospects are in question, there’s a huge amount of growth in e-commerce. That creates investment opportunities.

Companies that will benefit from digital and e-commerce innovation in China include big names such as Alibaba, Baidu and Tencent, says Kenrick Leung, director of investment for Greater China Equities at Amundi in Hong Kong. He manages the Renaissance China Plus Fund.

As Leung explains, “What e-commerce does – and what these Internet companies do – is cut out the middleman. They make things more streamlined and improve productivity. You can now marry businesses with end consumers by cutting out many additional layers.”

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Further, China’s focus on globalization will enable its digital companies to improve their reach to overseas vendors and customers, says Leung. “A lot of these companies are very interesting at this point. They’ll be direct beneficiaries of this trend toward innovation and global trade.”

China is committed to fostering innovation over the long term. “China has been trying to acquire as much technology as possible to go from a low-end assembler of cheap consumer goods to an exporter, or manufacturer, of value-added goods,” he adds.

And, these efforts are very much coordinated with the country’s domestic policy. Recently, China’s state council was given specific targets for science and technology progress; the government wants knowledge-based intensive services to contribute up to 20% of the GDP by 2020, up from 15% currently.

From local to global

China is also advocating for digital growth globally. The eleventh G20 summit was held in China this year, and was focused on promoting interconnected global growth and innovation, and a multilateral trading system.

This call for unified economic growth was triggered mostly by factors such as the aftermath of Brexit and persistent anti-globalization sentiment, says Leung.

“There’s a lot of potential reversal of trade as it [has] happened under the World Trade Organization format,” he says. But, “what China really wants to do is continue with the current system of trading in terms of exports and globalization.”

China would also like to see more governments focusing on the coordination fiscal and monetary policy, with a focus on fiscal stimulus and structural reform. Leung notes that China sees this as a way to improve the productivity of the global economy. He adds that domestically, China is coordinating its fiscal and monetary policy.