In light of the trip to China, Australian Ethical Investment portfolio manager Nathan Lim said he was able to conclude that the slowdown in China has already happened and the economy has settled into a lower gear.
“There is a general view that the second half of 2014 will be roughly flat or modestly higher than the first half as there does not seem to be another major stimulus program on the way,” said Mr Lim.
“The Chinese government has recognised that its previous rounds of stimulus were excessive and lead to massive misallocations of capital that has resulted in excess capacity in numerous industries,” he said.
Mr Lim said China is redefining its economic playbook to be less dependent on fixed asset investment.
“It is trying to transition to an economy that is more balanced between investments and domestic consumption while simultaneously dealing with the legacy of unproductive capacity,” said Mr Lim.
“Balancing the need for short-term growth while allowing the excesses to wash out of the system will take time and constant vigilance, but at this time the authorities seem to be doing a good job,” he said.
Mr Lim also said China’s moves to crack down on corruption will have a long-lasting impact on doing business in the country – thereby influencing "merit-based" competition.
“Merit-based competition will favour foreign multinationals as they have a generational lead on salesmanship,” said Mr Lim.
