Under the background of the general slowdown in economic growth in various countries around the world, how do overseas investment institutions view the current prospects of China's economy and market? How to view the prospects of reform and opening up of the Chinese market?
At the recent 2022 Greenwich Forum 5th Anniversary Annual Conference, a number of financial leaders, including Ray Dalio, founder of Bridgewater Fund, believe that despite the current challenges facing China's economy, they still believe that China's long-term prospects are bright.
(Image source: Greenwich Forum)
Greenwich Forum is a high-level summit that brings together global leaders from the financial, business, technology, government and media industries. This year, it was held in a combination of offline forum + online summit, and speakers included Nobel laureate Michael Spence, former Federal Reserve Chairman Alan Greenspan, Connecticut Governor Ned Lamont, Bridgewater Fund founder Ray Dalio and other investment industry leaders.
Fund managers, regulators and institutional investors from more than 80 countries attended the conference on a wide range of economic topics such as global macroeconomics, inflation, technological innovation, carbon neutrality and sustainable development, and emerging market opportunities and challenges. This included an online seminar on "Opportunities and Challenges for China's Capital Markets".
Global inflationary pressures are not going away completely
In a conversation about the global economy, Michael Spence, a renowned economist and winner of the 2001 Nobel Prize in Economics, pointed out that the world is living in a world unlike the low inflation environment of the past three or four decades. While it's easy to blame the pandemic and its associated response, the reality is that the deflationary forces that have shaped the past few decades are rapidly fading.
Spencer pointed out that in the developing world, there is no longer an unlimited supply of untapped productive resources, which is an important source of inflationary pressures. Including different labor market conditions in the context of an aging global population, rising pressure on energy and food prices under the Ukraine crisis, and a world that is more vulnerable to shocks under climate, the pandemic and geopolitical issues, many things that create inflationary pressures, although some are transitory, but many will not disappear.
"We will live in a world where the fiscal and monetary policy framework is very different from what we have been accustomed to for at least 20 years." Spencer pointed out that many emerging economies have been affected by the pandemic and climate problems, their financial conditions have been hit, and the headwind factors are quite strong, which looks like a "perfect storm". He warned that the capital flows that may arise from the appreciation of the dollar will affect the financial conditions of many countries. For many people, this is quite a challenging environment.
Regarding the Fed's policy, Spencer believes that the Fed must bring inflation down. They are lagging behind in action and have already admitted it. In this environment, he believes that the Fed can design a larger time frame for a "soft landing" and then adjust its decisions based on data changes in the framework to see if inflation can be brought under control. The key is to see how quickly you can achieve your goals. One year is too short, 2 to 3 years seems more reasonable. If the target can be achieved, at least there will be a return to some kind of equilibrium, and there will be no runaway inflation. But it's still a different world. He believes it is important to remind businesses and investors that once they return to this equilibrium, they can invest more in fiscal stimulus or sustainability without the risk of runaway inflation.
The trend of global investors increasing the size of China has not changed
In a conversation with a Bloomberg moderator about the investment prospects of the Chinese market, Ray Dalio, founder of Bridgewater Funds, said that despite the current challenges facing China in areas such as local debt, real estate, the epidemic and an aging population, he believes that China's long-term prospects are still bright.
At the webinar "Opportunities and Challenges for China's Capital Market", Ming Land, Head of Global Financial Markets at UBS, said that this year is an important year for China's economy and politics, and the current macro environment does face many challenges. In major developed markets, central banks have been raising interest rates in response to rising inflation. This, coupled with rising energy prices due to geopolitical conflicts, has many implications for the real economy. China's economy came under pressure in the first half of the year, but it is expected to pick up in the fourth quarter and China's economic growth may return to more than 4% next year.
"Unlike developed economies, China's current monetary policy is still relatively loose, and despite the complex and volatile macro environment, it still creates a favorable policy environment and makes the market more liquid. From a diversification and equity valuation perspective, we believe that the performance of China's stock market next year is worth looking forward to. The landlord said. As for how to view the reform and opening up of China's financial market, Landlord Ming said, "We believe that Chinese regulators have been listening to the suggestions of all parties and maintaining positive interaction and communication with international investors in market supervision and development." In recent years, there have been many significant developments in the interconnection between the Chinese market and overseas markets, and the interconnection will also be expanded in the field of ETFs. In addition, it is expected that investment tools such as commodity futures and index options will be opened to global investors in the future, further promoting the opening of China's capital market to overseas investors. ”
Against the backdrop of a global liquidity crunch, some investors are worried about whether overseas investors will leave the Chinese market. The landlord Ming believes that there is no need to worry too much. Investors across the globe are looking for alpha and beta opportunities in the market, and when their investment strategies underperform, they opt out or wait and see. However, from the perspective of the overall size and allocation of the market, there is still a lot of upside for overseas capital allocation to the Chinese market, and the trend of global investors increasing the size of China has not changed.
Pang Yang, founder and chairman of Liankexihe Energy Technology, said that when it comes to renewable energy, developed countries such as China and Europe have more in common than other fields. This is an area that requires cooperation between developed and developing countries. China is currently the world's largest installer of renewable energy projects, and after a decade of efforts, the cost of renewable energy technologies such as solar and wind energy in China has dropped significantly.
Therefore, Pang Yang believes that overseas investors can focus on Chinese companies in these areas. This is also one of the hot topics in China's stock market in the past few years. He also stressed that carbon neutrality may be the goal of the next half century, or even a century, and will be a long-term global effort. China has huge investment opportunities in a number of areas.
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