China 2021 - the investing outlook in 10 charts

The investing outlook for China in 2021 explained in 10 of the best charts presented by our experts at GCC 2021.

China 18 Jan 2021 2 min read

1. Credit growth may slow in 2021, and that will likely mean slower growth numbers for the economy

China credit impulse (y-o-y growth), Dec 2010-Dec 2020

China’s credit impulse, y-o-y growth 2010 to 2020, according to Bloomberg data
Source: Bloomberg. As of end December 2020

2. China’s V-shaped recovery appears to already be leveling off

China retail sales, exports, fixed asset investment (y-o-y, %), Jan 2020-Jan 2021

China retail sales, exports, fixed asset investment (y-o-y, %), Jan 2020-Jan 2021, National Bureau of Statistics
Source: Bloomberg. As of end December 2020

3. China sovereign yields continue to look good

10-year sovereign real yields compared, Dec 2010-Dec 2020

China government bond yields compared to US, Japan, Germany, Australia and UK, 2010 to 2020, according to Bloomberg data.
Source: Bloomberg. Based on 10-year yields. Real yields computed with core CPI. As of end December 2020

4. China’s bond market has grown in size and will likely keep growing

China onshore bond market, market cap (USD trillions), Dec 2015-Dec 2020

China’s onshore bond market by bond category, 2015-2020, according to WIND
Source: WIND, UBS Asset Management. As of end December 2020

5. Inflows into China onshore equities look likely to continue growing.

Cumulative net buying of Southbound/ Northbound Connect since inception (In USD bn), Nov 2014-Nov 2020

Stock Connect investment flows, Northbound and Southbound, 2014-2020, according to official data.
Source: Wind, Goldman Sachs Global Investment Research.

6. China A-shares are becoming more institutionalized

A-share investor structure (% of total free-float market cap), 2013-2Q20

China A-shares investor structure, according to official data

Note: Mutual funds include special accounts and exclude accounts of insurers, social security funds and annuities. Trust investment does not include investment by privately offered funds through trusts. Brokers include proprietary trading and active asset management.

Source: Corporate filings, SSE, Asset Management Association of China, CBIRC, National Council for Social Security Fund, Securities Association of China, Ministry of Human Resources and Social Security, PBoC, CSRC, Wind Info, CICC Research

7. Retail investors still dominate A-shares, making turnover extremely high

Percent turnover across region (by year)

China equity market turnover, 2014-2019, according to World Bank data
Source: World Development Indicators (The World Bank), UBS, as of 31 Dec 2019

8. Analyst coverage of A-shares will remain low, opening opportunities to find underappreciated companies

Coverage of companies with USD 500m market cap

Analyst coverage of A-share markets in China, according to Reuters
Source: Reuters Eikon; UBS HFS, as of August 2020.

9. High yield spreads look attractive, and have the potential to close in 2021

High yield spreads compared, Dec 2013-Dec 2020

Asian, China, US, and European high yield spreads, 2010-2020, according to Bloomberg data.
Source: Bloomberg. As of end December 2020

10. China will continue to be the driving force for the world economy for the foreseeable future

China’s contribution to global growth, 2019-2024

China’s contribution to global economic growth, 2019-2024, according to Haver/International Monetary Fund data
Source: IMF, Haver, UBS. Projections to 2024. Updated as of October 2019.

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