Insight Investment - Fri, 03/01/2024 - 19:57

China: potential growth – lower for longer

We continue to have a bearish view for Chinese growth over the medium term relative to current market expectations. Our base case is that the potential growth rate of China falls over the next five years before plateauing at around 2.5% from 2028 onwards.

In this paper we highlight the key factors that underpin this belief and why we believe the risks are skewed to the downside.

Demographics are now one of the more serious problems. The consequences of the one-child policy, introduced decades ago, are now increasingly apparent and will remain a drag on growth for the foreseeable future. The population is now shrinking and, despite more recent policies to encourage larger families, the rate of decline is forecast to accelerate for decades ahead. Although this could potentially be countered by increasing migration, this appears an unlikely solution given the scale that would be needed.

Figure 1: China’s population is already in decline, and it’s going to get worse

Source: Macrobond. Data as at 31 December 2023, data for 2023 and beyond are forecasts.

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Insight Investment

Insight is a global asset manager specializing in fixed income and risk management strategies with over $892.2bn in AUM. We have been working with insurers since 1934 and manage more than $34bn for over 79 insurers globally. Our investment philosophy offers clients innovative yet practical investment solutions. We manage custom fixed income strategies to help meet clients evolving needs, such as liquidity, principal preservation, earnings stability, tax minimization and total return.

Insight is subsidiary of BNY Mellon, which offers insurance clients additional services and access to boutique investment management teams. These services offer the potential for deeper collaboration across your portfolio.

AUM as of September 30, 2024. Assets under management (AUM) represented by the value of the client’s assets or liabilities Insight is asked to manage. These will primarily be the mark-to-market value of securities managed on behalf of clients, including collateral if applicable. Where a client mandate requires Insight to manage some or all of a client’s liabilities (e.g. LDI strategies), AUM will be equal to the value of the client specific liability benchmark and/or the notional value of other risk exposure through the use of derivatives. Regulatory assets under management without exposures can be provided upon request. Unless otherwise specified, the performance shown herein is that of Insight Investment (for Global Investment Performance Standards (GIPS), the ‘firm’) and not specifically of Insight North America. A copy of the GIPS composite disclosure page is available upon request.

Jeffrey Berman

Head of North America Distribution
Jeffrey.Berman@insightinvestment.com
+1 212 365 3341
200 Park Avenue, New York, NY 10166
www.insightinvestment.com

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China: potential growth – lower for longer

Figure 1: China’s population is already in decline, and it’s going to get worse

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