China – Feature
to be cognisant of – for example, the property sector,” Pascal says. There are also opportunities in new industries. China needs to upgrade its electrical grid infrastructure and develop energy storage systems to improve power supply and distribution, says Chi Lo, a senior market strategist, Asia Pacific, at BNP Paribas Asset Management.
“It also needs to wind down its fossil fuel consumption by using more green electricity and achieve a structural shift from energy-intensive heavy industry to high value-added segments to boost energy efficiency,” he says. Chi estimates new-sector investments will amount to $781bn (£573bn) a year – about 10% of China’s annual total fixed asset investment – over the next decade. Given the transformative nature of much of the Chinese econ- omy, innovation and technology are on the list of sectors with the potential to offer long-term investment success. And the potential for long-term success is what Border to Coast looks for. “When we think about investing in China, we like to do so through a thematic lens – for example, innovation and technol-
ogy or the transition to a greener economy. Within each theme are businesses we think should experience long-term success,” Pascal says. “As an example, we believe that the continued growth of the Chinese middle class will support consumption growth and premiumisation,” he adds. “This should benefit a variety of names, whether they be businesses producing dairy products or highly-prized liquor manufacturers.” Some may raise an eyebrow at the idea of a transition to a greener economy within all the opportunities in China, given its position as the world’s largest emitter of greenhouse gases. But Chinese president Xi Jinping has committed the country to reach carbon neutrality by 2060 – and with that will come opportunities, says BNP Paribas’ Lo. Nevertheless, the Chinese approach to climate change, and ESG issues in general, has been a source of debate, and indeed scorn, for some time. How can institutional investors square the circle on meeting ESG investment demands while benefit- ing from the investment opportunities in China?
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