covid reopening versus decoupling, competition

covid reopening versus decoupling, competition
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China's economic outlook will be 'deeply challenging' for next 5-10 years: strategist

China previously “sailing” economically while other countries struggled, but the world’s second-largest economy may have a rough road ahead of it, according to a strategist.

“China has reached that level of development where many emerging markets tend to find things increasingly difficult,” said Mark Jolley of CCB International Securities.

He pointed to the deglobalization trend, the friction between the US and China, as well as the weak world economy.

“On both sides of the Pacific we hear many wishful thinking that decoupling will promote rather than hurt domestic growth. We disagree,” Ethan Harris wrote in a BofA Global Research note published Friday.

“Decoupling is a negative-sum game that harms both countries. It means abandoning comparative advantage and leaving capital stranded,” added the global economist at Bank of America Securities, although he acknowledged that there may be “strong geopolitical and reliability reasons.” for decoupling. .

Beyond the short-term growth pickup, we see continued downward pressure on potential or trend growth in China.

ethan harris

Global Economist, Bank of America Securities

Domestically, Beijing also has to manage its real estate sector in trouble, Jolley told CNBC “Asian Squawk Box” on Monday.

“I certainly think China’s economic prospects over the next five to 10 years are profoundly challenging,” he said.

“In the past, China has kept sailing while everyone else has struggled. Now China will probably be more like other countries,” he added.

BofA’s Harris said “adverse demographics” and the limits of an export- or construction-driven economy are challenges for Beijing.

Read more about China from CNBC Pro

“Beyond the near-term growth pickup, we see downward pressure on potential or trend growth in China,” he said, noting a return to “a more command economy” and concerns that are holding back foreign investment flows. .

‘bright spot’

There is a

The sell-off in Chinese tech shares presents a “huge” opportunity, he said, though he cautioned that investors need to factor in policy changes for income redistribution.

“You just have to be very selective in what you choose: focus on businesses and sectors that [are] not so much politically driven, because that’s probably where most of the risk lies,” he said.

— CNBC’s Evelyn Cheng contributed to this report.

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