The Daily Update - China's Relentless Opportunistic Streak

With many nations at odds both internationally and domestically, China has taken it upon itself to use the opportunity to strategically amass what it can as soon as it can across the globe. China, who already has its fingers in Asian, African and Latin American pies now appears to be rapidly taking ownership of Europe too. According to data published by Bloomberg, the world’s largest economy in PPP terms has attained and invested in European assets totalling USD 318bn over the past decade; with activity calculated at ~45% higher than that from the US, in dollar terms. Said assets range from airports, seaports and energy farms to football teams, and of course we must mention China’s huge funding in infrastructure projects across the region and investment in the European tech sector. Away from these eye wateringly huge deals, China has also taken over much of the central riverfront in London, and has conquered deals worth USD 70bn in the UK alone. It doesn't appear as if this relentless opportunistic streak is going to end any time soon either, our view is that exposure to the Chinese renminbi is becoming ever more important; investors may otherwise find themselves chasing the pack.

Interestingly, using the IMF’s GDP in PPP terms data from 2016, PwC has carried out its own analysis on what the world would look like in 2050. According to an article published on its website, China is expected to remain the globe's largest economy going into 2050, with India overtaking the US to second place, Indonesia fourth with Brazil also in the top five. It highlights Vietnam, the Philippines and Nigeria as the biggest jumpers; the former for example is expected to move from 32nd spot to 20th. These three countries are also included in Jim O’Neil’s “Next Eleven”, or N-11. Currently we do not hold Indonesia and the Philippines as there is very limited relative value, if any, in the sovereign and quasi-sovereign space, and Vietnam and Nigeria are rated sub-investment grade. Also the aforementioned countries do not have the strongest NFA positions. If, however, the economic fundamentals do improve and sufficient risk-adjusted value is available there would be nothing stopping us from looking at such names, however, we could be waiting 32 years.

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