China will stike back

2018 will be considered one of the darkest years for Chinese markets. Plagued by the trade conflict with the United States and sluggish growth, the Shanghai and Shenzhen exchanges lost nearly 30% of their value in one year, while the Nasdaq only fell 3%. But for many analysts, this downturn is a windfall for investors: the decline will be followed by a rebound!

In the short term, however, our dossier explains that it would be wise to remain cautious. If by late March, no agreement is reached in the negotiations between the United States and China, retaliation between the two countries will start up again and the markets could fall once more. Considering the legendary unpredictability of Donald Trump, there’s no doubt that volatility will continue, possibly even until the end of the US president’s term.

But over a longer period, China’s economic upswing seems inevitable. After learning by copying Western companies, the “factory of the world” is currently transforming itself into a fully-fledged research and development laboratory. From space conquest and new medicines to digital technologies and electric cars, in many industries, China is about to inch ahead of the United States.

In our dossier, we selected 30 Chinese companies that are at the forefront of their industries.

Regardless of the international climate, they will be supported by China’s immense domestic market, which includes 1.4 billion people – one-fifth of the world’s population. This is because, according to Wu Jinzi – CEO of biopharmaceutical company Ascletis, whom we interviewed in this issue – Chinese people are increasingly inclined to spend money on their health, insurance and well-being, doing so gradually as their incomes rise.

China, which alone is responsible for more than one-third of global growth, is currently transitioning from a model focused on exporting lowcost products towards a consumer economy. Another definite trend is that Chinese companies are producing ever more high value-added goods. This transformation – which is a matter of concern for Western countries annoyed by industrial espionage, technological theft and the government support that Chinese companies receive – will not be easy.

For new Chinese giants, such as Tencent, Alibaba, Baidu and Xiaomi, to expand even further internationally, Beijing has to make concessions, particularly regarding censorship and technology transfer, while simultaneously allowing their US counterparts (Google, Facebook and Amazon) to settle in China. It’s a win-win situation!

Happy reading!