Eurizon Bets On New China

China with an overriding export vocation, with a closed economy, and a strong dependence on commodities, is only a distant memory. We have entered the new era of the Red Dragon, the era of a society driven by consumption and services, technology and innovation, by a market economy and urbanisation, in which the middle class plays a central role. Demand from Chinese consumers is the engine of the world economy, and accounts for around three-fourths of annual GDP growth. in the long run, the winning companies will be those capable of innovating both their products and the way they interact with customers. By 2025, China will become a hi-tech superpower, and it is already the largest market in the world for robotics1. In 2018, installations of industrial robots amounted to 154k2. In 2030, the artificial intelligence market is estimated to be worth around 150 billion dollars, and in 2025, 82%3 of companies will be able to count on an ultra-wide band connection. Furthermore, two major demographic changes are underway in China: the ascent of the middle class, and the fast ageing of the population, that set the stage for a wide range of opportunities. In addition, internal migration is also a significant trend, that is resulting in the birth of several megalopolises. China’s fast-paced development is one of the most important events of the recent economic history of the world. China is currently the second-largest economy in the world, behind the United States, and also according to IMF data, accounts for 28% of global GDP growth. Chinese economic growth is transforming from high-speed to high-quality. Beijing’s gradual opening up to foreign capitals has marked the beginning of a new era, driven by consumption and by technological innovation, the two pillars of New China. For companies throughput the world, China is considered less and less as a destination for low-cost production, and increasingly as an appealing market per se, a place to test new ideas. China is Italy’s fifth trade partner, and in 2019 import-export trade between the two countries was worth 44.6 billion euros4. The grand “New Silk Road” initiative will place this colossus even more at the heart of global trade.

China is the only country in the world that is continuing to grow despite the Covid-195 pandemic. Chinese consumption and and-commerce have played a strategic role, together with internal tourism. One of the trends that has accelerated significantly is the confidence the population have in Chinese brands. Pandemics have always acted as a boost to the modernisation of urban fabric, to create more resilient cities: a major example is the creation of a new smart city that will lie 100 kilometres from Beijing, Covid-19 proof6, to make people’s lives easier in case of new lockdowns.

In China, there are currently wealth and asset management opportunities worth 16,000 billion euros, and the savings rate is significant. However, to invest in this country, it is not enough to seek information from the outside: China needs to be understood with a clear grasp of its origins. This is the strategy pursued by Eurizon, present in China since 2007, with a shareholding (49%) in one of the leading local asset managers, Penghua Fund Management. Thanks to this entity, which over a few years has quadrupled its assets, from 20 billion in 2007 to almost 100 billion at present, Eurizon is the only Italian company among the top 25 foreign asset managers7, and ranks 15th. Also strategic is the Hong Kong subsidiary, Eurizon Capital Asia, recently strengthened with the addition of a highly-skilled team with a long track record, with the aim of expanding business in Asia developing the local reality as a hub of excellence for investment on the Asian markets, as well as making the most of expertise on the Chinese stock market. Another important asset is a team of professional asset managers located in the United Kingdom, specialised in investing in the Chinese market: Eurizon SLJ Capital LTD. This team, with a strong Chinese connotation and formed by Mandarin speakers, boasts many years of international experience in macroeconomic and currency analysis, combined with a strict quantitative approach and a well-documented global track record. As well as making the most of the investment opportunities available in China, we have opted to do so pursuing differentiation by asset class, by investing in products with different goals, ranging from stock funds that invest in “A” shares, to bonds in renminbi, and even a multi-asset strategy that brings together all of Eurizon’s management expertise.

1 Source: Made In China 2025
2 Source: International Federation of Robotics
3 Source: Made In China 2025
4 Source: MISE Observatory
5 Source: Ufficio Nazionale di Statistica and National Bureau of Statistics
6 Source: The Telegraph
7 Source: Z-Ben Advisors

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