• Sahil Mahtani, strategist at Investec, describes the next key growth engine for China: its rural population.
• He dismisses the consensus view that Chinese growth engines have exhausted or that the country is mimicking Japan in the 1990’s.
• Instead, he suggests China’s current 40% (560m.) rural-to-urban ratio is similar to that of Japan in 1960s – the period where its growth took off.
• He cites primarily e-commerce growth in rural China but also a policy push by Xi Jinping to develop rurally as encouraging signs for growth.
• These factors combined make him bullish on Chinese assets, in particular consumption-exposed sectors.
Why does this matter? The Chinese economy grew at just 6% in 3Q 2019, its weakest rate in 27 years. Meanwhile, an ongoing trade war with the US continues to cast a shadow over Chinese growth. As such, this podcast is an important light in the dark, pointing to more structural, long term growth.
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