Three reasons why China will continue to represent a long-term growth story – Morgan Stanley


It is nothing short of amazing that the S&P 500 is up nearly 8% year-to-date and the US economic recovery remains on track. But as encouraging as that rebound seems, it may not be the most important driver of global capital markets going forward. Instead, Lisa Shalett from Morgan Stanley points to the speed and durability of China’s economic turnaround.

Key quotes

“China’s economic balance continues to improve as domestic consumer and business demand makes up a greater percentage of spending. The country is less dependent on exports, which are now only 17% of GDP, down from 35% in 2007. We see room for more growth as per capita disposable income and consumption spending return to their long-term growth trend, after a vaccine is available. Vacation-related spending is still off by close to 60% currently in China.”

“China appears to have ample fiscal and monetary policy flexibility, unlike most central banks and sovereign governments around the world. It didn’t have to resort to bond buying, balance-sheet expansion or historically unprecedented levels of government spending this year. While the US, Europe and Japan pursued policies that saw combined fiscal and monetary stimulus move toward 30% of GDP, China’s policy expenditures have been about 6% of GDP so far.”

“China’s interest rate and currency dynamics remain attractive, suggesting a healthy backdrop for attracting foreign capital flows and protecting investor capital gains. China 10-year bonds are yielding nearly 3.2%, the widest premium in 15 years to the US 10-year Treasury, which yields less than 1%. For its part, the yuan, which China’s central bank generally keeps within a targeted range, is now at the strongest level since 2018, trading at 6.65 to the dollar. Such metrics point to the ongoing internationalization of the renminbi. Morgan Stanley & Co. strategists estimate that 10% of global reserves could be held in China’s currency by 2030.”

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

USD/JPY ignores downbeat Tokyo CPI, trades mixed above 104.00

USD/JPY traders look for strong signals to break the chain of three-day declines. Tokyo CPI slipped below -0.6% forecast, core CPI matched -0.7% expected in November. Risks struggle amid US off, mixed news on vaccine, US-China front. A light calendar can extend the sideways moves.

USD/JPY News

AUD/USD: Fizzles upside momentum below 0.7400 but bears await clear signals

AUD/USD eases after refreshing the three-month top the previous day, downside have recently been confined though. Chatters surrounding US-China relations, virus woes probe risk-on but absence of the US traders, light calendar elsewhere, limits the moves.

AUD/USD News

Gold: Bears noting old support for a discount

The price of gold has broken into bearish territory below a 38.2% Fibonacci retracement. In the recent good news in markets, the price of the yellow metal has come under renewed pressure. Bears will seek a discount on a pullback to retest old support, expected to turn resistance. 

Gold news

WTI regains $45.00 even as choppy session limits the moves

WTI fades pullback moves from the highest in nine months. The energy benchmark eased from the multi-day high the previous day as global optimism, mainly fuelled through the coronavirus (COVID-19) vaccine hopes, fizzled. Also challenging the oil bulls was the US holiday due to Thanksgiving Day.

Oil News

Black Friday 2020 Discounts!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info

Forex MAJORS

Cryptocurrencies

Signatures