By Duncan Lawrie Private Bank
At a Duncan Lawrie Private Bank emerging markets roundtable on Tuesday, expert panellists on China gathered together to discuss the key issues arising from the new leadership of Xi Jinping over the next decade. He has already started pushing for change, but will his tenure bring about more fundamental and much needed governance reform?
The collected thoughts of the panellists (Edward Bland, Duncan Lawrie Private Bank (Chair); Dean Cook, Duncan Lawrie Private Bank; Fen Sung, Premier Fund Managers; Pinakin Patel, JP Morgan Asset Management; John McClean, China Food Company; Maggie Wang, Firstextile; and Kate Phylaktis, CASS Business School) on the new administration are summarised below:
- Corruption – Many politicians in the new administration are young and educated in the West. They want reform and have a zero tolerance approach to corruption.
- Relaxation of the one child policy – The panel believes that the new Chinese administration could eschew its ‘one child policy’ in favour of Politburo’s ‘two child policy’, in answer to China’s ageing population and workforce, in a bid to further boost economic growth. However, even this is likely to take 20 years to have an impact.
General observations:
- Pollution – Environmental pollution in China is a huge issue but nothing has been done in anticipation of the leadership change.
- Foreign investment – When talking about China it must be remembered that it is made up of 34 states, all with different growth rates competing against each other for investment. But China sees foreign investment under QFII as a tap that can be turned on and off as demand requires. It’s more like the wild west, where locals treat investing as gambling.
- Domestic market – A number of Chinese companies tend to float on markets in the US and Europe as the process to list on the Shenzhen/Shanghai stock exchange is too long. There are around 800 companies in the queue and the Government has stopped the approval process.