China: Investors are overly focused on banking crisis

ON CHINA

China has polarised investor opinion recently as a banking crisis appears to be looming. But Matthews Asia's CIO Robert Horrocks argues there are reasons to remain positive on the market outlook.

China is undergoing a fundamental transition from an economy based on credit and investment to a more balanced one focused on consumer spending, services and rising productivity. But investors have been focusing on slowing GDP growth, declining exports and its massive credit overhang. They incorrectly conclude that China is about to encounter a credit event as a late-stage impact of the global financial crisis. But actually China is undertaking an engineered soft landing. Urbanisation, rising education levels, a rationalisation of existing debt and the nascent emergence of market forc...