KKR Releases Outlook on Chinese Economy by Henry McVey
February 26, 2015
“Over the past 10 years,
The piece outlines important macro-related investment conclusions. These include:
1) |
Fixed asset investment as a percentage of gross domestic
product (GDP) has peaked. Environmental concerns – by becoming
more important than job creation – are now driving public and
private corporate behavior. Consistent with this more conservative
projection, decisions over key spending initiatives and growth
targets are now increasingly being made by |
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2) |
Against this backdrop, the government is prodding the private
sector to allocate more resources toward services that can boost
overall growth in |
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3) |
Despite lower oil prices, energy efficiency remains a major
focus. As of 2014, our research shows that oil demand is
growing about 0.69% for every 1.0% of GDP growth, which is
significantly lower oil intensity than the 0.94% ratio that
prevailed 10 years ago. We see it falling even further,
underscoring that |
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4) |
Contrary to conventional wisdom, we do not view the recent rate
cut by the People’s |
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5) |
Reforms, including anti-corruption initiatives and greater
transparency in the financial services arena, continue to gain
momentum, despite their near-term chilling effect on GDP growth.
We see signs that the government is finally raising the bar on
pricing credit risk properly at the local level. In our view, if
|
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6) |
China’s Internet economy is having a profound effect on
traditional commerce. China’s online sales effort is already
larger than that of |
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7) |
Though it may pause, we do not believe that the current rally in A-shares is over. Equity issuance is a critical variable in the deleveraging process, so – all else being equal – higher, not lower prices are more desirable for the Chinese leadership. Moreover, from an asset allocation standpoint, a low inflation environment favors stocks over real estate, which has traditionally been viewed as an effective hedge against the “norm” of high inflation and low deposit rates. |
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Links to access the full report as well as an archive of our previous publications follow:
- To read the latest Insights go to: http://www.kkr.com/global-perspectives/publications/china%E2%80%99s-rebalancing-effort-will-it-be-enough
- To download a PDF version go to: http://www.kkr.com/sites/default/files/KKR_Insights_28-150223.pdf
- To download the KKR Insights app on iTunes: click here.
- For an archive of previous publications of Insights and Thoughts From the Road please visit www.KKRinsights.com
About KKR
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world‐class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners’ capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE:KKR), please visit KKR’s website at www.kkr.com.
The views expressed herein are the personal views of
Media
KKR
Kristi.huller@kkr.com
Source: KKR
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