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After decades of rapid development, China’s strategy is changing. It remains to be seen whether the country is headed toward Japan-style extreme stagnation. China’s efforts to transition to what Beijing calls high-quality development will take time to materialize. Goldman Sachs calls today’s China story one of “rebalancing” and has picked 40 buy-rated stocks to play up the theme. “A key lesson of the past year is that, similar to the experiences of Japan’s lost decades, there are ways to make money even in a sustained bear market,” Kinger Lau, chief China equity strategist at Goldman, and a team wrote in a Jan. 9 report. ” , He estimates that some consumer names, artificial intelligence companies and emerging global players will be among the Chinese stocks that could perform well. China’s stocks have still not recovered from the recession of 2023. Mainland Chinese and Hong Kong stock indices are down so far this year. “People often aspire to positive change at the beginning of the year,” Robin Jing, Morgan Stanley’s chief China economist, said on Jan. 11. “However, the sentiment among investors and policy advisers attending our China New Economy Summit in Beijing last week was Was weak.” Report. “What is the path forward? Active fiscal easing and a rapid shift towards economic rebalancing towards consumption,” the report said. Data for December and fourth-quarter gross domestic product (GDP) due late Tuesday, New York time, may provide more clues on China’s economic trajectory — and whether policymakers need to act. Goldman estimates China grew 5.3% last year, and forecasts a slowdown to 4.8% this year. “Despite the underperformance of global equities in 2023, MSCI China has recorded three +10% tradable rallies during the year,” Lau wrote in a separate report earlier this month, with gains generally focused on policy expectations. Keeping in mind. The report also notes that both mutual and hedge fund mandates globally are driving multi-year low allocations to Chinese stocks. Despite such uncertainty, China’s top officials are re-engaging with the international finance world. Prime Minister Li Qiang is scheduled to speak in Davos on Tuesday. Chinese Vice Premier He Lifeng met last week with global financial executives who are part of the Chinese securities regulator’s international advisory council. Its listed members include executives from Invesco and Goldman Sachs. Vice Premier He is also the director of the Office of the Central Commission for Financial and Economic Affairs, a position once held by trade negotiator Liu He. As for China’s economic outlook, comparisons with Japan may ultimately be more academic as the debate becomes more about the extent to which national security has replaced economic growth as a priority. Beijing has made clear that it wants to enhance domestic technological capabilities with an emphasis on credit-driven growth. Goldman’s Rebalancing Stock Picks Goldman’s rebalancing stock picks include what it calls “small giants,” companies Chinese authorities have chosen to support out of strategic interest. There are four such names in the portfolio: Friends Electronics – a Shanghai-listed company that sells hardware and software systems for laser cutting. Asimchem Laboratories – a contract developer and manufacturer of medicines. Many of its facilities are registered with the US Food and Drug Administration as establishments that manufacture drugs distributed in the US or available for import into the US. The stock is listed in Shenzhen and Hong Kong. StarPower Semiconductor – manufacturer of power semiconductors, which are used to control the flow of electricity in home appliances and solar energy grids. The company is listed in Shanghai and has a branch in Europe. SICC is a manufacturer of silicon carbide, which is used to make semiconductors. The company is listed in Shanghai and has a subsidiary in Japan. Even in a state increasingly concerned about security, private sector investment in manufacturing is “very strong,” Arthur Kroeber, partner at Gavecal Dragonomics, told The Wire China late last year. “It tells you that people are still moving forward with a lot of opportunities in different areas,” he said, pointing to cancer drugs, industrial robots and clean energy devices. Beijing’s official language describes the case as one of “high-quality developments”. “I am often asked the question, will China ignore development because it talks more about security?” Liu Jianchao, minister of the international department of the Chinese Communist Party Central Committee, said at a Council on Foreign Relations event last week. “We believe that high quality development can only be achieved in a highly secure environment,” Liu said. “But what we want is a balanced and positive interplay between security and development. We will never ignore development. And this is the key to solving all the problems and challenges in China.” — CNBC’s Michael Bloom contributed to this report.
