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LONDON, Apr 21, 2014 - (ACN Newswire) - "New rounds of reforms in China will bring about a second "season" of the "Chinese miracle" as the Prime Minister said. Many pension funds in Europe did not fully enjoy the investment opportunities the first time around, so they could catch up now," according to Dr Fan Gang, Director, China's National Economic Research Institute (NERI) & Secretary General, China Reform Foundation.
A speaker at the marcus evans European Pensions & Investments Summit 2014, in Montreux, Switzerland, 28 - 30 April, Dr Gang talks about China's new model for economic growth and what Chief Investment Officers (CIOs) in Europe can look forward to.
- What is your outlook on the Chinese economy? What do pension fund CIOs in Europe need to know?
The Chinese economy is stabilised now. Like many other countries, China adopted fiscal stimulus and monetary easing policies after the financial crisis, but by mid-2010 it had already started tightening some policies, such as the housing market and government investment in infrastructure. Investors must keep this in mind when they read about a slowdown in China. Most emerging markets only started the exit in 2012.
In the next five years, China will grow by seven to eight percent. Are there other economies with that kind of growth? This environment offers good returns on long-term investments. If compared with other emerging countries, the risks in China are under management.
- Many critics say China's growth is government-led rather than consumption-driven. What do you think?
The private sector, which includes multinationals, accounts to 70 percent of GDP, so it is already very private. From a structural point of view it is true that consumption is low but there is an effort to change that.
Investors must first understand the different nature of investing in China. A lot of the investments are in infrastructure and housing, which are both long-term, durable goods. Investments in the US and Europe can generate returns tomorrow, but investments in railways and highways in China will generate returns over the next 100 years.
Although the government is unlikely to adopt a stimulus policy like that of 2009, it will maintain this level of investment as the country is in the process of urbanisation.
- Has political reform come too late or will it help set China on the right track?
China is on the track of market-oriented reform, with more emphasis on the private sector and opening up for more compliance on international rules, but change will not happen overnight. These are gradual changes but the country is on the right track. The economy will be much more efficient in the long-run.
- Which sectors and asset classes should long-term investors look at?
My question is how much do they invest in China directly? Many invest in Chinese related sectors or offshore assets, but not very much inside China. Private equity companies will soon be allowed to set up subsidiaries, which will allow even more investors to bring money in leading to even more investment opportunities.
My advice is to try to catch up, because the second season of China's miracle will bring big opportunities.
About the European Pensions & Investments Summit 2014
This unique forum will take place at the Fairmont Le Montreux Palace, Montreux, Switzerland, 28 - 30 April 2014. Offering much more than any conference, exhibition or trade show, this exclusive meeting will bring together esteemed industry thought leaders and solution providers to a highly focused and interactive networking event. The Summit includes presentations on increasing fund resilience, establishing a robust risk framework, capturing investment opportunities and assessing the true value of emerging market investments.
For more information please send an email to info@marcusevanscy.com or visit the event website at www.epi-summit.com/FanGangInterview
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