- Equity Research Analyst
United States, Institutional
ChangeThe views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
The landscape of China's current economic situation is akin to scuba diving beneath turbulent waters. At first glance, the surface waves appear chaotic and perplexing, much like the headlines that often dominate discussions about Chinese equities. In my view, if you look below the surface, you can discover a market that is deep, diverse, and teeming with hidden gems.
As contrarian investors, our goal is to identify high-quality companies that are currently facing temporary challenges. We believe that companies possessing this character have the potential to deliver meaningful returns but are frequently undervalued due to the market's fixation on short-term factors. Our conviction lies in the belief that the most promising investment opportunities often lie in areas that most investors have either overlooked or have prematurely dismissed. In the present climate, we find a myriad of such opportunities in China.
Despite the abundance of internal and external challenges confronting China, there are still several positive aspects that deserve consideration:
First, we believe the ongoing restructuring of the real estate sector is poised to yield favorable outcomes in the medium to long term. China boasts a multitude of developers with many being relatively small in scale. In this restructuring process, smaller developers may be phased out while high-quality developers stand to capture a larger market share. Real estate developers played an important role in China’s early economic growth story by offering employment, asset appreciation, and industrial activities. However, in our view, the real estate sector did not produce significant commercial or productivity value in terms of unique intellectual property, nor industrial know-how, such as what we’ve seen with the semiconductor manufacturing industry in Taiwan or the EV industry domestically in China. We believe that diverting resources away from an excessive reliance on property investments will facilitate the allocation of capital and effort toward more sustainable growth avenues and productivity-enhancing economic activities. Historically, banks favored allocating loans to developers rather than small- and medium-sized enterprises. The long-term consequence of these reforms is expected to be a more diversified business landscape and a robust capital market that fuels the organic economy growth.
Secondly, although state-owned enterprises (SOEs) exert substantial influence over China's economy, perpetuating the impression of "State Progress, Private Retreat," we believe the competitive landscape in China remains far from static. In fact, our observations indicate that China continues to exhibit remarkable dynamism and competitiveness, giving rise to globally competitive companies across various advanced industries. These industries span medical equipment, advanced manufacturing and machinery, electric vehicles, and lithium battery manufacturing, among others.
Lastly, concerns about youth unemployment in China, often cited as a harbinger of impending economic challenges, may in fact indicate that regulatory crackdowns on platform economies are approaching their end. A thriving platform economy holds paramount significance for China's future, as a significant portion of its young workforce aspires to participate in this sector. The potential return of vitality to this segment suggests resilience in the Chinese economy and aligns with the nation's aspirations for technological and entrepreneurial prowess.
To conclude, navigating China's economic landscape requires delving beneath the surface, where the complexity and depth of the market reveal opportunities that defy prevailing narratives. As contrarian investors, we recognize the potential for high returns by identifying undervalued assets poised for resurgence. Despite the current challenges, China's constantly evolving competitive landscape and aspirations for technological leadership underscore the compelling investment opportunities hidden beneath the surface.
Expert
Related insights
Showing
of
Insights Posts
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Time to capitalise on the evolving role of bonds?
Continue reading
event
2
min
Article
2025-09-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
No bulls in the China shop?
Continue readingMultiple authors
event
Article
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Bizarro World: Could 2024 be the opposite of 2023?
Continue readingBy
event
Quick Take
2025-01-17
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Will a “Goldilocks” economy be just right for equity markets?
Continue reading
event
Article
2024-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Full speed ahead: China’s race to implement AI
Continue reading
event
Quick Take
2024-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Beyond China: what does the rest of the EM equity world have to offer?
Continue reading
event
Article
2025-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
URL References
Related Insights
Stay up to date with the latest market insights and our point of view.
highlight_off
You've been subscribed
Thank you for subscribing. You can manage your subscription using the links provided in any of our subscription emails.
Read next
Showing
of
Insights Posts
Active management
Fixed income
Macro and market
Wealth Program
Americas
Brazil
Canada
Mexico
USA
APAC
Asia
Australia
China
India
Japan
EMEA
Africa
Europe
France
Germany
Italy
Russia
United Kingdom
Emerging markets
Inflation
Interest rates
Macro
Monetary policy
Asset allocation
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Time to capitalise on the evolving role of bonds?
We outline why we think the new economic era is elevating the role of bonds as a source of attractive and stable income, downside protection and portfolio diversification.
event
2
min
Article
2025-09-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
No bulls in the China shop?
John Mullins, Irmak Surenkok and Steven Ye assess the investment debate surrounding China's prolonged underperformance and outline three investment ideas for active investors to consider.
Multiple authors
event
Article
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Economic cycle
Interest rates
Monetary policy
Credit
Americas
China
Europe
Fixed income program
Quick Take
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Bizarro World: Could 2024 be the opposite of 2023?
Fixed Income Portfolio Manager Brij Khurana details the dynamics that may upend investor expectations of a repeat of 2023 this year.
By
event
Quick Take
2025-01-17
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Outlook
Fundamental equity
EM equity
Large cap
Small cap
Equity
USA
APAC
China
United Kingdom
Emerging markets
Growth
Asset allocation
Volatility
Interest rates
Economic cycle
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Will a “Goldilocks” economy be just right for equity markets?
We provide an outlook on the ongoing shift to new investment regime, and the market segments that we expect will most heavily influence global equity performance in the coming year.
event
Article
2024-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
China’s growing self-reliance could bolster its equity market
Our expert, Philip Brooks, finds reasons for optimism in China's equity market.
event
Quick Take
2024-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Asia
China
Asia tech
China Currents
Macro and market
Market commentary
Multi-asset
Distribution
Quick Take
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Full speed ahead: China’s race to implement AI
Our experts examine market implications of China's AI expedition.
event
Quick Take
2024-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Beyond China: what does the rest of the EM equity world have to offer?
For investors contemplating a separate allocation to EM ex-China equities, members of our iStrat Team share their research on the composition of the opportunity set, the growing divergence in the behavior of EM ex-China equities and Chinese equities, and the long-term market outlook.
event
Article
2025-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
China fixed income: Dislocations create opportunities in this large and diverse market
Hear from our experts as they uncover new fixed income opportunities in China.
Multiple authors
event
Article
2024-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Outlook
Geopolitical
Information technology
Asian Opportunities
China Focus Equity
Asia Technology
Multi-asset
USA
China
Brand
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
How geopolitics and the energy transition may reshape global trade
We explore the potential near- and longer-term market effects of deteriorating US/China relations, coupled with the shift toward a low-carbon economy.
event
Article
2024-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
China
Economic cycle
Real estate
China Focus Equity
Multi-asset
Macro
Market commentary
Outlook
Article
China Currents
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Getting Real: China looks beyond real estate for economic success
Our experts explore signs of an improving macro picture in China.
event
Article
2024-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Reasons for optimism about Indian equities
Our experts explain why, despite criticisms that Indian equities trade at higher valuations today than they have historically, they may have the potential to help drive total returns over time.
event
Quick Take
2024-08-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
URL References
Related Insights
contact us
legal Information
© Copyright 2024 Wellington Management Company LLP. All rights reserved. WELLINGTON MANAGEMENT ® is a registered service mark of Wellington Group Holdings LLP. For institutional or professional investors only.
China’s growing self-reliance could bolster its equity market
Continue readingBy
Philip Brooks, CFA