The PBoC is working with the EU to implement a jointly recognised classification system for business environmental credentials by the end of 2021. The EU leads on ESG standards: regulatory alignment would be a boon for Chinese equities.
China’s automation push is the other key structural trend that could provide a tailwind for stocks. US export restrictions have strengthened China’s resolve to become self-sufficient in several key areas of technology such as artificial intelligence, biotechnology, blockchain, neuroscience, quantum computing, and robotics.
Aiming for self-sufficiency in key technology areas does not guarantee success, of course. But China is automating at a more rapid pace, which could lay the foundations for a burst of productivity growth. Already as of March, production of industrial robots had jumped 80.8% y/y. The surge in production of robotics has been accompanied by a ramp up in output of semiconductors and EVs.
The authorities are continuing to tighten regulations on household lending, and are aiming to improve underwriting standards (particularly for online lending) and risk controls. Grassroots social media campaigns that aim to get citizens to reduce their debt have been gathering steam.
