Vincent Chui: «External Shock is Important for China»
China historically did not change much without an external shakeup, according to Morgan Stanley’s Vincent Chui. That event is now here and the world’s second largest economy could successfully transition to a consumption-driven model.
US-China tensions are on the rise with the rapidly escalating trade war. After several tit-for-tat moves, President Donald Trump finally announced a 125 percent tariff on Chinese imports while Beijing settled on an 84 percent tariff on American goods.
In the near term, China will face material headwinds given its export-driven economy. However, there is reason to be optimistic in the longer term, according to Vincent Chui, managing director and head of wealth management, Asia Pacific at Morgan Stanley, who said that the current «external shock» could help it shift its model.
«Could you continue to export so much to generate growth inside the country? I think evidence suggests probably not,» Chui commented during a panel at the Endowus Investment Summit attended by finews.asia. «An external shock is important for China to change camp, to get away from the mightiness of its export-driven economy. This model has to change and I think that the external shock provided a catalyst.»
Learning From History
China has already been making efforts for quite some time to transition into a consumption-driven economy. Last month, Beijing released a plan to boost local consumption with 30 measures including higher wages, international tourism and childcare subsidies. While such moves make a difference, Chui believes that based on history, internal factors alone were unlikely to trigger a change.
«Asian countries in general, – China in particular – will not change significantly except with external shock,» he said. «Japan, the Meiji restoration, is an example as well China, the late Qing Dynasty.»
Government Support
Following this external shock, government efforts are expected to feel greater momentum. In addition to financial support for consumption, Chui also cited other positive factors domestically such as growing innovation in both tech and traditional industries, and the recent symbolic meeting between Chinese leaders and entrepreneurs from the private sector.
«For those people who are observers of Chinese politics and know how things work in Beijing, what happened was really a game changer,» Chui said on the meeting that saw an iconic handshake between President Xi Jinping and Alibaba founder Jack Ma, who had mostly vanished from public sight in recent years after famously criticizing Chinese regulators in October 2020 and derailing the IPO of fintech giant Ant Group.
«I think that really massively demonstrated a change of focus.»
Financial Market Outlook
Meanwhile, Chui expects financial markets to experience volatility as it faces a bipolar world of unprecedented tariffs, adding that whatever forecasts made now will likely be wrong or adjusted significantly. Still, he remained positive and highlighted rewards in a riskier environment.
«When uncertainty is high, then the expected returns from equity has to be higher as well,» he added.
In a survey conducted at the Endowus Investment Summit in Hong Kong, gold was the most popular choice as the top performer in the next 12 months, as selected by 37 percent of respondents, reflecting safe haven demand. But the longer term outlook was much more bullish with equities selected as the asset class with the best total return by end-2030, as agreed by 36 percent of respondents.
