December 11, 2015

Consuelo Mack: This week on WEALTHTRACK, is the Chinese dragon losing its fire? Long time China hand Andy Rothman, Investment Strategist at Asian mutual fund pioneer Matthews Asia takes China’s political, economic and investment temperature next on Consuelo Mack WEALTHTRACK.

Hello and welcome to this edition of WEALTHTRACK, I’m Consuelo Mack.
When was the last time you saw a positive headline about China? They are few and far between these days. The once unquestioned bullish case for China, that the Chinese century was at hand and that the Chinese juggernaut would dominate the world economy is now being challenged. “China’s Reckoning” as a recent Wall Street Journal headline put it came to a head in the summer when China unexpectedly devalued its currency the renminbi…
It’s benchmark Shanghai Composite Index experienced a sharp correction in a matter of days, after soaring to new peaks in June.
And the correction occurred despite a two month government led stock purchase program, totaling $200 billion dollars to prop up the market. That was followed by the detention of top officials from several investment firms for possible insider trading, market manipulation and spreading market rumors.

For a while the Chinese government seemed out of control in its reactions and actions.

Perhaps one of the most dramatic examples of Chinese policy gone awry is its one child policy which it recently eased after 35 years. It’s been a disaster on two counts. One, because it cut the birth rate so dramatically that the younger generation is not replacing the older. China’s working age population, ages 15-64 years is drastically shrinking. According to the United Nations, the 65 plus population will jump 85% to 243 million in 2030.

Another social cost, yet to be calculated is the millions of males with little hope of finding a mate and starting a family. In 2008 the one child policy had resulted in the birth of 120 boys for every 100 girls, that number decreased to 116 boys to 100 girls by 2014, but it is still far below the World Health Organization’s natural rate of 105 to 100.

Is China’s much heralded economic miracle over? How bright or dark it’s future?
This week’s guest is an experienced China hand. He is Andy Rothman, Investment Strategist at Matthews Asia, a U.S. pioneer in Asia focused investing. Rothman oversees the firm’s research on China’s economic and political developments as well as providing in-depth analysis on Asia.

Prior to joining Matthews in 2014, Rothman had spent more than 20 years in China, most recently working in the private sector as a macroeconomic strategist and before that in the U.S. foreign service, including a posting as head of the macroeconomics and domestic policy office of the U.S. embassy in Beijing.

Given the government’s intervention in Chinese markets and their recent turmoil, I asked Rothman if investors should just stay away.

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