For some investors, the improvement in Chinese equities has been built largely on looser liquidity, not improved fundamentals. The rally has stalled, with the benchmark Shanghai composite slipping below 3,000.
There may be some merit in this assertion, but the focus on weak manufacturing surveys does rather miss an important point about China: it is racing to become a high-tech services economy, with selective focus on high-value manufacturing. Shifting production to cheaper countries such as Vietnam fits well with this strategy. One Belt One Road binds many of these feeder nations into a sophisticated logistics chain, which is now spreading into Southern Europe.
Trieste, the neglected maritime hub in Northern Italy, is of particular interest to the Chinese authorities. The much shorter shipping times, compared with Antwerp, Rotterdam and Hamburg, are a major attraction. China has already invested heavily in Piraeus (Greece): there is significant potential to rebalance Europe’s transport and logistics networks towards the Mediterranean. Chinese investors have also fuelled a tourism boom in Greece, that has helped to bring the country’s unemployment rate down to 18.0%, its lowest since July 2011.
China’s Ministry of Industry and Information Technology (MIIT) is pushing hard to accelerate the roll-out of 5G, critical to the delivery of high-tech services. Industrial internet, smart transport, intelligent manufacturing, smart medical care and digital agriculture are priority areas.
