The Year of the Ox: China’s Investment Outlook for 2021
As China celebrates its New Year this week, we take a closer look at the emerging macroeconomic themes and investment prospects in the country.
Perhaps the biggest theme in China this year is the expected resurgence of economic activity. Gross domestic product expanded 2.3% in 2020, despite the pandemic. China seems to be bucking the trend this year as well. Estimates by the IMF suggest GDP growth could be as high as 8.3% in 2021. Investors could be on the lookout for rebound stocks that benefit from this stunning recovery.
Meanwhile, China’s venture capital and startup sector remains as robust as ever. A surprising wave of antitrust moves against China’s tech behemoths has renewed interest in the smaller tech firms. As authorities crack down on Alibaba and Tencent, startups could step in to fill the gaps, opening up opportunities for entrepreneurs and investors across the country.
The rebound in consumption and reinvigorated startup sector could provide wealthy Chinese families a way to diversify. According to a survey by UBS, 29% of family wealth in the region originates in real estate. Diversifying away from real estate could be top of mind for these families in 2021.
Roughly 3% of China’s capital markets are owned by foreigners. The country has been notoriously restrictive to overseas investment. However, the pandemic may have changed that. The government has already made moves to relax Foriegn Direct Investment (FDI) rules which could pave the way for global investors to deploy cash into the region.
The government’s efforts could channel this investment into key sectors such as high-tech manufacturing, cutting-edge material science, tourism, renewable energy, electric vehicles and enterprise services. However, experts expect authorities to stay reticent about investments in strategic sectors such as the digital economy, finance and trade.
On February 25th, MarketCurrents WealthNet will host a panel of Chinese family offices to discuss these themes and more. Learn more about the upcoming online event here..