3 reasons China will rebound

China’s economy bottomed out over the past six months.

As a result, the country is facing a brighter future, says Raymond Chan, chief investment officer of Hamon Investment Group in Hong Kong. He manages the Renaissance Asian Fund and Renaissance China Plus.

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“We think growth will continue on a slightly upward bias – plus or minus 8%,” he says. “We don’t [forecast] any dip in the economy like we did last year.”

There are a couple reasons for his optimism:

• China’s exports are improving (largely driven by a healthier U.S. economy);
• The rest of Asia is booming; and
• New leadership is targeting reforms.

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Regarding the last point, China welcomed new political leaders in March 2013. These officials have been focused on the reforms originally introduced by their predecessors, which includes changes to healthcare, property taxes and the country’s financial sector.

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“Reforms that have been relatively slow for the last two or three years have to accelerate,” he says. “We think the new leadership won’t — and cannot — wait for another year or two to accelerate reforms.”

And that’s good news for foreign investors. The new government is targeting growth at 7.5% for the next five years, adds Chan.

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“China will continue to grow [quickly] but it needs to change the growth models.”

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