FXI - China Might Not Be A Paper Dragon In 2024

2024-02-19 00:08:29 ET

Summary

• In general, Chinese stocks quoted in Hong Kong are extremely cheap, and growth prospects for China remain strong.
• China's total debt-to-GDP ratio is driven by corporate debt, while the central government and households are not significantly indebted. Furthermore, this corporate debt is mostly held within profitable SOEs.
• China's GDP may be understated rather than overstated.
• There are many other observations that clash with what's being reported in the media.

For anyone but the most distracted observer, it's obvious that Chinese stocks have been under a lot of pressure. The Hang Seng, Hong Kong Stock Exchange's main index, now sits around the same levels first reached in 1997, 27 years ago.

In large measure, this has happened as a result of extreme anti-China sentiment, which itself mostly exists because in December 2017, the United States decided to label China a strategic competitor. And soon after, actions taken by US authorities (trade war, stock delistings, Huawei blockade, semiconductor blockade, negative media messaging) created the most negative environment I've ever seen any country exposed to....

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