ROTHMAN: PERSPECTIVE ON CHINA

December 11, 2015

Understanding China. Is the world’s second largest economy in serious trouble or just experiencing growing pains? Perspective from experienced China hand, Andy Rothman, Investment Strategist at Asia focused mutual fund pioneer, Matthews Asia.

WEALTHTRACK Episode #1225; Originally Broadcast on December 11, 2015
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ANDY ROTHMAN

Consuelo Mack

This week, as representatives from countries from around the world meet in Paris to try to hammer out an agreement to fight global warming, there were pictures of horrific pollution in Beijing, China’s capital. China is one of the major developing countries resisting ambitious emissions- reduction targets proposed by developed countries including the U.S. and France. 

Positive headlines about China 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.

Its benchmark, Shanghai Composite index experienced a sharp correction in a matter of days, after soaring to new peaks in June.  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, under suspicion for possible insider trading, market manipulation and spreading market rumors. For a while, the Chinese government seemed out of control in its actions.

Perhaps one of the most dramatic examples of Chinese policy gone awry was its 35 year old one child policy which it recently eased. It’s been a disaster on several counts. 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 is its future?

This week, we’ll talk with Andy Rothman, an experienced China hand and  Investment Strategist at Matthews Asia, which is a U.S. pioneer in Asia focused investing. He oversees the firm’s research on China’s economic and political developments and provides 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. 

We also have an EXTRA interview with Rothman, available exclusively on our website.  If you miss the show on Public Television, you can always watch it at your convenience online. If you have comments or questions, please connect with us via Facebook or Twitter

Have a great weekend, a happy Hanukkah and make the week ahead a profitable and a productive one.

Best Regards,

Consuelo

Mathews Asia

IF YOU DO INVEST IN CHINA DO SO THROUGH AN EXPERIENCED ACTIVE MANAGER

TOP-RANKED CHINA FUNDS

  • MATTHEWS CHINA FUND Inception 1998
  • MATTHEWS CHINA DIVIDEND FUND Inception 2009
  • MATTHEWS CHINA SMALL COMPANIES FUND Inception 2011

Source: Morningstar

No Bookshelf titles this week.

CHINESE CONSUMER BULL

Invest in the Chinese consumer

No stock mentions in this episode.
This transcript is available here. More information regarding WEALTHTRACK transcripts can be found here

This is Andy Rothman’s appearance on WEALTHTRACK

CHINA DEBT

One of the indicators China bears cite in their glum assessment of China’s economy is the country’s debt levels. According to a report by global consulting firm McKinsey, China’s debt to GDP has increased nearly four-fold since 2007. At nearly 282% of GDP it now exceeds U.S. levels. Matthews Asia Investment Strategist, Andy Rothman assesses the problem.


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