It would be wrong to treat China as ‘unstable’: a strategist

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Visitors near the Yuyuan Bazaar in Shanghai, China, on Sunday, February 11, 2024.

Raul Ariano | Bloomberg | Getty Images

Even as China’s economy struggles, treating it as uninvestable is not the way some analysts have suggested, said John Bilton, head of global multi-asset strategy at JPMorgan Asset Management, to CNBC’s “Squawk Box Europe.”

“I don’t think you can treat the second largest economy in the world as another investment or non-investment, which would be way off the mark,” said Bilton.

Doubts about investing in China have emerged as the economy struggles with pressures from inflation, a lack of economic data that points to a recession, and a struggling real estate market.

Uncertainty about monetary policy and a shrinking workforce are other causes of concern, Bilton noted.

Treating China as a 'non-investment' would be 'wide of the mark,' strategist says

The People’s Bank of China said last month it would reduce the amount of liquidity it required banks to hold, which many hope will allow more loans to be issued and higher spending. encouragement

Some analysts saw this as a possible dovish policy move from the PBOC, which has been reluctant to take measures that could stimulate the struggling economy.

Financial organizations including the International Monetary Fund have called for further monetary policy reforms since then. IMF Managing Director Kristalina Georgieva told CNBC this week that China has been advised to use more of the available fiscal and monetary policy space.

IMF chief: China must show determination to undertake economic reforms

At the same time, China’s shrinking population means its workforce is also shrinking – and the workforce is the biggest factor in economic growth, said Bilton. This means other drivers of economic growth are being asked to “do a lot of heavy lifting,” he explained.

Addressing these issues will be critical to increasing international investor confidence in China, Bilton said.

“There is some more unified policy in terms of monetary policy management, dealing with the deflation issue that exists, and also a sign that the real estate issues are behind us I think is going to be important there, ” he explained.

But despite the problems, there are opportunities for investors in China, said Bilton.

Chinese government bonds could be one of them, he said. The large size of China’s fixed income market and the small amount of international money within it, as well as the ability to cut rates due to deflation are some of the reasons for this, Bilton explained.

Stock markets are still the other option, he said.

“The reality is that there are still huge opportunities to build stocks in China. There is a lot that the economy needs to do to improve in terms of the financial sector, dealing with an aging population, transport, services etc. So here is one where it is. maybe it’s a matter of focusing more laser on the individual stocks,” he said.

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