Visitors near Yuyuan Bazaar in Shanghai, China, Sunday, February 11, 2024.
Raúl Ariano | Bloomberg | Getty Images
Even though China’s economy is facing challenges, viewing it as uninvestable, as some analysts have suggested, would not be the right move, said John Bilton, head of global multi-asset strategy at JPMorgan Asset Management , on CNBC’s “Squawk Box Europe”.
“I don’t think you can treat the world’s second-largest economy as an alternative investment or as an impossible investment, that would be far from reality,” Bilton said.
The People’s Bank of China announced last month that it would reduce the amount of liquidity it requires from banks, which many hope will lead to more loans and more spending.
Some analysts see this as a possible change in accommodative policy from the PBOC, which appears reluctant to take steps that could stimulate a struggling economy.
Financial bodies, including the International Monetary Fund, have since called for further monetary policy reforms. IMF Managing Director Kristalina Georgieva told CNBC this week that China has been advised to make more use of the fiscal and monetary policy space it has.
At the same time, China’s population decline means the workforce is also shrinking — and labor is the most important factor when it comes to economic growth, Bilton said. That means other drivers of economic growth have to do “a lot of work,” he explained.
Resolving these issues will be key to increasing international investor confidence in China, Bilton said.
“A more concerted policy in terms of the direction of monetary policy, addressing the problem of disinflation that exists, and also signs that the housing problems are behind us, I think, will be key in that regard “, he explained.
But despite the problems, there are opportunities for investors in China, Bilton argued.
Chinese government bonds could be part of that, he said. The immense size of China’s fixed income market and the relatively small amount of international currency it contains, as well as the potential for lower rates due to disinflation, are some of the reasons, Bilton said.
Stock markets remain the other option, he said.
“The reality is that there are still huge stock picking opportunities in China. The economy has a lot of room to evolve in terms of the financial sector, managing the aging population, transportation, services, etc. .it’s probably about focusing more on individual actions,” he said.
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