Page 35 - DIY Investor Magazine | Issue 34

Markets were unnerved last year by the government’s interventions in sectors such as education – where they effectively banned firms from making profits – and consumer- focused online companies – where harsher controls on the of customer data threaten the profitability of some businesses.
Antipathy towards companies listing on US markets also derailed or severely damaged some high-profile IPOs. Then there is a huge property sector-related bad debt problem to deal with.
NARROWING THE GAP BETWEEN RICH AND POOR IN CHINA
From an investor’s point of view, it may look as though China is repeatedly shooting itself in the foot. From the Chinese government’s point of view, it is trying to rein back some of the excesses in the economy that have widened the gap between rich and poor and threaten to create dissent against the ruling communist party.
For example, the government is making it clear that it sees housing stock as homes not investments, the education clampdown was an effort to stop families borrowing heavily to fund private education, and controls on the use of data by big tech are something we should probably all be concerned about.
There are reasons why the Chinese stock market may rally. Once the party congress scheduled for some time in the second half of 2022 is out of the way, the political rhetoric in China may ease a bit.
If a way can be found for China to extricate itself from its zero-COVID policy, the market would take that very positively (though this relies on revaccinating the population as the original Chinese vaccine was not as effective as hoped).
The grip that the government has on the economy may make it easier for China to navigate the current slowdown.
Individual investors will make up their own minds on whether China is investable.
There are plenty of other governments around the world pursuing questionable policies. In most places though, governments change, businesses go on.
As for Vietnam, the impression that Craig gives is of a pragmatic government that sees the benefit of attracting foreign capital.
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DIY Investor Magazine · July 2022