Growth Slows, but the Great Wallet of China Remains | American Funds

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2016 Outlook

GROWTH AMID VOLATILITY  |  Emerging Markets  |  January 2016
Growth Slows, but the Great Wallet of China Remains

Resilient Consumer Demand Has Continued to Support Sales Growth Among Leading Firms

“The nature of Chinese growth is changing, with consumer demand playing a greater role. E-commerce, health care, insurance and air travel are just some of the industries where there are high-quality local firms and multinationals that appear well-positioned to prosper as China’s economy makes this difficult transition.”

Galen Hoskin
Galen Hoskin Portfolio Manager San Francisco office 23 years of experience (as of 12/31/16)

Even at Times of Shaky Market Confidence, Individual Firms Have Continued to Do Well in China

Sources: Capital Group, company reports, Goldman Sachs, FactSet Research Systems, MSCI. MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.

Sure, Chinese growth has slowed, but behind the headlines there’s a bigger story: economic evolution. China’s transition away from an investment-led economy toward an economic structure more reliant on consumption is well underway. Chinese consumers have continued to serve as a relatively resilient source of sales and earnings growth for market leaders. In a variety of sectors, high-quality domestic firms and multinationals have continued to thrive.

As the economy transitions, further market setbacks are possible. Meanwhile, broader confidence in the “emerging markets story” remains fragile as investors fret about the global impact of higher U.S. interest rates. And yet, for active investors, market weakness may create the possibility of investing in high-quality companies at compelling valuations. Arguably, the environment is ripe with opportunities for selective investors who maintain a long-term perspective.

China’s consumer economy is not immune to broader weakness. Slower growth overall may act as a headwind for consumption. That said, leading firms can continue to distinguish themselves. For investors, being selective is the key. Sports and fashion wear, travel and tourism, insurance and pharmaceuticals are some of the main areas where market leaders may continue to see solid sales growth over time.

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Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.