As long as the government remains focused on these reforms, it will be willing to sacrifice the rapid pace of growth of the last decade. This will no doubt lead to ‘shocking’ headlines that official growth targets for the country will be revised down in the coming year. But those new growth targets will remain well above the level of economic expansion that can be expected of any advanced nation next year and should pique investors’ interest. The trick will be in knowing how to approach this new China. Rather than the old sectors of manufacturing and production of low-cost goods, investors may want to consider the areas which are gaining policy support, such as environment protection, renewable energy and healthcare.
If the government does its best to maintain new or lower growth targets through selected fiscal and monetary easing, then the economy should avoid the hard landing.
Kerry Craig is global market strategist of JP Morgan Asset Management
