The U.S. must strive to reach an agreement with China because otherwise, it will miss one of the most important developments in the 21st century, Vontobel's Lars Kalbreier said to finews.asia.
Lars Kalbreier, for many years China has been Asia's growth engine. Is this coming to an end?
A slowdown in growth has already occurred. There are two main reasons for this: Chinese authorities taking the trade conflict with the U.S. too lightly in early 2018, which has hurt the country economically.
In addition, the Chinese stock market eased in the second half of last year. This was a wake-up call to the Chinese authorities, which have since introduced various economic measures.
With what result?
China's shares were among the worst performers in the emerging markets, losing 25 percent last year.
«This plan underscores China's economic and, ultimately, geopolitical ambition»
But the situation has since changed, not least against the background of a global recovery in early 2019 and a possible resolution to the trade conflict with the U.S. In this respect, I expect China's economic growth to reach 6.5 percent this year, which is still very good.
For many investors, shares of tech companies such as Alibaba or Tencent have been in their favor in recent years. What should they focus on in this new upswing?
Investors should now look to the domestic market – companies that cater to the local consumption demands. Most of them are companies selling their products through online platforms like Alibaba. This is the norm in China now.
In addition to the international expansion of Chinese companies, the state-led global infrastructure project «One Belt One Road» is particularly popular. What impact does it have on the stock market?
In Asia, this plan is of absolute priority because it unambiguously underscores China's economic and, ultimately, geopolitical ambition. It is no coincidence that China is also called the Middle Kingdom, and in the future will fully meet this role with the infrastructural development in different countries close to Europe.
«The project will undoubtedly help make global trade more sustainable»
Its realization requires an enormous amount of goods and services. For example, cement – a company like Lafarge Holcim will undoubtedly benefit from this demand, which should be reflected in its share price. At the same time, the «One Belt One Road» project will reduce the transport costs of goods between participating countries by around 20 percent, which will undoubtedly help make global trade more sustainable.
In this respect, the U.S. must be all the more interested in reaching an agreement over the trade dispute with China because otherwise, it will miss one of the most important developments in the 21st century.
«The renminbi has until recently been a tool for the Chinese government»
Economically, China is developing into an antipole to the U.S. – just as the Soviet Union used to be politically in the past.
What role does the Chinese currency play in this environment?
The renminbi will certainly gain importance globally. That is also the intention of the authorities in Beijing. They are managing the currency accordingly, with a trend towards free tradability in the long term – which in turn will increase pressure on the U.S. and ultimately on the dollar. The renminbi has until recently been a tool for the Chinese government to realize its economic ambitions.
Lars Kalbreier is the Chief Investment Officer of Vontobel Wealth Management, based in Zurich. He joined the Swiss bank in April 2017. Previously he worked in various roles for Credit Suisse and is also a founding member of the Credit Suisse Research Institute. He started his career in banking as a strategist for global markets at J.P. Morgan. He is a member of Hughes Hall at Cambridge University and a Chartered Financial Analyst (CFA) charter holder. Kalbreier holds an M.Sc. degree in Finance and Business Administration from HEC Lausanne.
