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For years, China served as a global growth engine. But then came the Covid pandemic, strict lockdowns and a real estate crisis. In 2023, the country was still unable to contribute anything to global growth. Since then, however, the wind has changed. “The problems are not all solved yet,” says Carsten Gerlinger, Managing Director and Head of Asset Management at Moventum AM. “But the opportunities for investors are increasing again.”

While the US economy has surprised on the upside, China’s economy has recently been plagued by significant structural problems: from the real estate sector and youth unemployment of over 20 per cent to industrial overcapacity and growing tensions with the US. “As a result, the Chinese economy – unlike in previous periods of economic weakness – was unable to provide any impetus to the global economy,” explains Gerlinger.

However, the government has now taken numerous measures: taxes have been cut, lending has been boosted and the real estate sector has been steered into a controlled crisis. With success: the sector’s contribution to gross domestic product has been reduced from 34 per cent to around 18 per cent. “That’s healthier,” explains Gerlinger. As the Chinese primarily finance their real estate through savings, they are only partially affected by the fall in real estate prices.

The initial data for 2024 also points to an economic recovery: In January/February, growth in industrial production accelerated to an average of seven per cent compared to the previous year. Production was supported by investments and exports. Retail sales barely increased, but households have high savings. “There are also other structural factors that speak in China’s favour,” explains Gerlinger. The country is at the forefront of electric car production and is also playing a major role in the race for the high-growth artificial intelligence sector.

However, there is a downside to China’s innovation and technology policy: In the USA and now also in Europe, complaints are being voiced that the People’s Republic is subsidizing its domestic companies, whose dumping offers are flooding the markets of the West. The result is a fierce price war, for example for electric cars or solar panels. “If China does not support its domestic demand and continues to focus on exports, there is a risk that Europe and the USA will close off their markets,” explains Gerlinger.

Overall, according to Gerlinger, China is likely to find it difficult to keep its economic growth above five per cent in the long term, but a rate of between four and five per cent can be expected. In the course of the recovery, the stock market is also picking up again. “A lot of negative factors are now priced in due to the fall in share prices and valuations are attractive,” says Gerlinger.