While many investors fixate on China's economic data – its exports, infrastructure investments and capital account outflows – we at Allianz Global Investors have long understood that one never gets a well-rounded picture from balance sheets and official news releases alone.
That is precisely why we form our global view using local investment professionals who conduct their own research, and it is why our unique GrassrootsSM Research division has built a network of on-the-ground sources around the world. True insights can come from anywhere, and with a country as dynamic and complex as China, the real story is evident in its residents’ day-to-day lives.
Just visit two of the country’s most popular attractions and one will find a capitalist country full of endeavour and enterprise – one with billions of inhabitants pursuing the "American dream" with Chinese characters.
The Pandas in Chengdu
On a recent trip to Sichuan to see China’s national treasure – the panda – I saw clear evidence that China is no longer an “emerging” country reliant on cheap exports and “roads to nowhere”:
- Chengdu, the centre for pandas, has a population of 15 million and has expanded to meet the needs of its population in every direction, building five ring roads and two airports for international and domestic traffic – very much a modern metropolis.
- The push-bikes are gone and almost everyone now drives a car – most of which are European and Japanese, and cost twice the amount of a local or locally assembled car.
- Chengdu has become a centre for domestic tourism, with residents flocking to see the rare panda and breathe the clean air of the Taoist mountains.
- The expansion continues in nearby Dujiangyan, which is building a EUR 8 billion hotel and entertainment project that will significantly increase the number of visitors to the region.
The Shift Away from Agriculture
On the 250-kilometer road to the great Buddha at Leshan, built between 713ad and 803ad, one sees agriculture projects that are small in scale, even though many hillsides are packed with tea plantations reaching up to the top. As the urbanization of China continues, with many agricultural workers migrating to the cities during the winter for extra wages, it is clear that China will need to create more efficiencies and economies of scale in its agricultural sector, as has been done in the US and Europe, so that the country can remain broadly self-sufficient. Yet this process will take time, and the appeal of farming is waning: The younger generation does not want to follow their parents into such a difficult lifestyle, and mobile technology is increasing their awareness of the many opportunities available to them inside and outside of China.
The Warriors of Xian
In Xian, once the capital of China and the home of the famous terracotta warriors, one finds another huge city, bigger than London, with a population of more than 10 million. The city is a hub for both medical and aerospace research and development, yet it also has serious traffic issues: Within the 10 miles of ancient city walls, built in the 16th century, the roads are not yet big enough to serve the sheer number of cars. Yet despite Chengdu and Xian being called “Tier 2” cities by the Chinese government, they have a modern look and feel – a mix of old neighborhoods, new developments and American-style freeways.
The Buzzing Cities
These less-famous Chinese cities have a buzz and a fast pace of life like any other city in China, powered by soaring populations and growing wealth. Credit the work ethic of China’s people, which remains very strong: For the younger generations, a good education is crucial; their parents, meanwhile, still want to save, provide for their children and buy homes. Most everyone I met seemed fired up by the "American dream" – eager to work hard, get their lucky breaks and get rich.
As China rebalances its economy to find new growth engines, there are still many domestic opportunities for its people to become successful as markets grow and economic maturity spreads wealth. Of course, capitalizing on those opportunities requires the same blend of talent, luck and contacts needed elsewhere. But China’s people understand that with success comes the ability to buy options, just as in the West, which is why they are so energized and determined to succeed – and why each of the country’s 37 provinces has market potential similar to the UK’s. Although still ruled by the Communist party and still classified as an emerging-market nation, in daily life, China feels like a capitalist country – busy, bustling and loud.
About the Author
Neil Dwane is the Global Strategist for Allianz Global Investors and part of the Equity Investment Management Group. He coordinates and chairs AllianzGI’s Global Policy Committee, which formulates the Allianz Global Investors house view, as well as leads and directs the agenda setting for the biannual Investment Forums. Mr. Dwane still manages some European equity portfolios, and thought leadership articles written by him are published regularly.
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Important Information
The material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.
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