- China’s economic growth rate has declined to a nearly 30-year low.
- The U.S.-China trade dispute has hurt import/export activities in both countries.
- Despite these headwinds, select companies should continue to thrive as consumption grows in the world’s most populous country.
The outlook for China’s economy in 2019 and beyond hinges on two crucial questions: Will Beijing unleash a new stimulus program to help counteract a clear deceleration trend? And, if so, will it be large enough to make a difference?
So far, equity markets are taking a positive view. Chinese stocks rallied nearly 15% during the first two months of the year, as measured by the MSCI China Investable Market Index. After a dismal 2018, investors appear to be hopeful for an economic rebound, coupled with a near-term agreement to avoid a full-blown U.S.-China trade war.
We may indeed see a trade agreement soon, but in my view, China’s economy will continue to weaken as stimulus measures fall short of market expectations and China’s traditional investment-led recoveries of the past fail to materialize. Yes, I’m saying it will be different this time.