Why China has become too big and distinct to ignore
The rising tensions between the U.S and China have created new risks, but it’s also possible that the two countries pursue distinct economic and technological models that prosper in parallel
Incorporating Chinese assets into a global portfolio can provide meaningful diversification benefits because of its growing role as a disruptor and innovator as well as China’s domestically oriented economy and monetary policy that result in economic and interest rate cycles that sometimes diverge from global markets. Chinese equities and bonds have comparatively low correlations to global benchmarks. As a result, adding Chinese assets to global portfolios can increase the expected return and reduce the risk, based on the UBS Global Wealth Management Capital Market Assumptions.There are risks to investing in China, including macro, regulatory, and geopolitical risks. Antitrust regulation has been relatively light-touch on the tech sector, but could become tougher for Chinese internet platforms. Delisting risk for Chinese companies trading on U.S exchanges has increased, but we believe more Chinese companies pursuing listings closer to home and strong investor interest in China can limit the market impact. Longer-term economic risks include the 100-percentage-point rise in the debt-to-GDP ratio over the past 10 years, and the shrinking working-age population. History suggests, however, that China’s policymakers have ample tools at their disposal to mitigate these risks.
The writers are:
Michael Bolliger, Chief Investment Officer Emerging Markets, UBS Global Wealth Management and
Arwed Christensen, Head Wealth Management Israel and Global Family Office Central and Southeastern Europe at UBS
This publication is intended for information only and is not intended as an offer to buy or a solicitation of an offer. Furthermore, this publication is not intended as an investment advice and/or investment marketing and is not replacing any investment advice and/or investment marketing provided by the relevant licensee which is adjusted to each person's needs.
It should be noted the author of the article and/or UBS Wealth Management Israel Ltd. and/or any of the UBS AG affiliated entities may have a special interest in the topics mentioned in the article, as defined in the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 1995.