Insights from China’s Economy

For two decades, I have conducted grass-roots research in emerging markets, visiting countries from Brazil to Kenya. My goal is to understand evolving consumer needs and find long-term investment opportunities by identifying companies benefiting from long-term structural forces – either domestic champions or companies that are taking a growing share of global industries.

In late April, I visited China with three Newton analysts, meeting companies, attending the Canton trade fair and Shanghai auto show, and holding focus groups with Chinese consumers. Here are some key takeaways from our visit.

Confidence in the Future Economy

China’s economic situation currently shows no significant signs of either deterioration or improvement. Nonetheless, there is an incremental risk associated with the yet-to-be-realized impact of US tariffs. Feedback from vendors and trading-company employees indicates that US companies are cancelling orders, which could potentially affect employment and earnings across various sectors. The complete extent of this impact remains uncertain. As a reference, China’s exports to the US represent about 2.3% of China’s GDP.[1]

The real-estate sector in China continues to exhibit signs of weakness. However, with interest rates remaining very low, individuals are investigating opportunities on the periphery, particularly in prime locations within major cities.

Despite the current subdued state of the economy, our focus groups indicate that consumers have a high level of confidence in the future, influenced by technological progress and the rising share of value-added Chinese products around the world.

Domestic Product Appeal

Domestic products are increasingly perceived as offering good value. Chinese products nowadays often exhibit high quality and attractive pricing compared to foreign equivalents. The contemporary Chinese consumer is pragmatic, less impulsive, more informed, and focused on meeting needs at the best value, regardless of brand or country of origin.

Domestic electric vehicles have emerged as clear winners in terms of consumer preference. Other areas where domestic brands are gaining strength include clothing, sportswear, consumer electronics, appliances, local fast-food chains and cosmetics.

Navigating Trade Tensions

As tariff tensions persist, it is evident that China remains resilient and committed to defending its position. National pride is high, and the people exhibit the strength to endure challenging times with patience. Concurrently, the government continues to provide substantial support to the economy. The extent of subsidies was notable, with discounts ranging from 20-30% on numerous consumer products priced below 5,000 renminbi (approximately US$685).

Nevertheless, local consumers and companies are advocating for more significant consumer stimulus policies from the government, which have the potential to enhance macroeconomic growth and elevate equity markets later this year.

Investment Implications

Given the uncertain backdrop, we remain broadly tilted towards defensive positioning in our global emerging-markets portfolios. However, we will look for opportunities to selectively increase exposure to China. For investors with a long-term investment horizon, market volatility can be a good opportunity to add to leading Chinese names with a long runway for growth.

1 Source: US Census Bureau, World Bank, March 2025.