The Slowdown in China is Not Over

| Multi-Asset

Source: Bloomberg, Unigestion, as of 19.10.2021

Following China’s rebound in 2020, the economy has slowed sharply. In July, as the deteriorating economic situation began to materialise, our view on China was negative despite the policy mix tools available to the authorities to fix issues and support its economy. At that time, we were waiting for an improvement in the momentum of the China Growth Nowcaster before considering a tactical return to Chinese growth assets. Three months later, while the correction in financial assets has continued, making them more attractive relative to other emerging and developed countries, the economic situation remains deteriorated.

We believe the current industrial policy choices will weigh on potential growth and on expected returns as 1) the leverage of the economy will be reduced via the regulation of the real estate sector, and 2) the energy intensity that has increased sharply with the development of data centres, 5G and electric vehicles, will be confronted with rising energy prices and the lack of sufficient alternatives.

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