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Which sectors would you recommend for investments instead of Alibaba and Tencent?

Most investors look at China from a growth perspective, and therefore put their assets into blue chip companies. But by contrast, not all state-owned enterprises are badly run.

A lot of them had attractive balance sheets last year and most of them, across all sectors of the economy, are looking to reward minority shareholders through higher yield or income. The dividend ratio in China is much lower than say in Switzerland and could easily go higher. China could very much become a total return versus a capital appreciation story.

Who would benefit most from such a change of perspective?

The income return story is very attractive for long-term investors. If you see the pension system in China evolve, you also have to keep in mind the different mindset towards equity investing. Income versus capital investing is simply a more stable way of looking at an asset class.

Is U.S. President Donald Trump a risk for China?

At this point, the risk is much smaller than a year ago. But the Chinese need the Americans and the Americans need the Chinese. The biggest risk is that if Trump can’t implement his policies, it will be an easy win to go back on foreign policy and to penalize the Chinese.

«China has already indicated that they stand ready to protect their rights»

The U.S. commerce secretary released proposals to President Trump last week. These proposals appear to be at the protectionist end of the spectrum and if enacted in their current form, could increase the risk of retaliatory trade restrictions from the likes of the EU and China. There is a bit of a waiting game involved between now and April 11, the date at which Trump needs to settle of his preferred measures.

If something does get passed, we would likely see a response from other countries. China has already indicated that they stand ready to protect their «rights» and the EU earlier last year indicated their intention of responding if necessary. South Korea has made similar statements.

Catherine Yeung is investment director at Fidelity International based in Hong Kong. She joined the investment firm in 2006, coming from BT Financial Group, for whom she worked in Sydney. She started her career at United Capital Securities in Australia. Yeung has a Master of Commerce from University of Sydney. She is of Australian and Chinese descent and focuses on Asian markets at Fidelity International.