The reality behind the China headlines

Growth still strong and valuations attractive

A recent visit to Beijing proved to be an opportune moment to look at the reality of life in the world's second-largest economy, despite a background of doom-laden headlines about trade wars and economic slowdowns.

In reality, China is significantly less vulnerable to a US trade war than at any time in the past 20 years. Not only is it becoming a service-led economy, but the importance of the US as an end market for exports has shrunk considerably. In many respects, US President Donald Trump is a decade or so too late; while China's adjusted resource gap peaked at nearly 14% of GDP in 2007, today that has all but disappeared, reflecting a much more balanced economy. The second point is that income growth remains at a very healthy 8% to 9% with retail sales (ex-autos) running at around 10%. There...