Visitors near Yuyuan Bazaar in Shanghai, China, Sunday, February 11, 2024.
Raul Ariano | Bloomberg | Getty Images
John Bilton, head of global multi-asset strategy at JPMorgan Asset Management, says that despite the challenges the Chinese economy faces, China remains an investment destination as some analysts have suggested. Treating it as impossible is not the right decision, he told CNBC’s “Squawk Box Europe.”
“I don’t think you can treat the world’s second-largest economy as if it were an alternative investment or not investable. That misses the point,” Bilton said.
The People’s Bank of China announced last month that it would reduce the amount of liquidity banks are required to hold, a move many hope will spur more lending and more spending.
Some analysts see this as a possible dovish policy shift by the People’s Bank of China, which is reluctant to take measures that could boost the struggling economy. It appears to be.
Since then, financial institutions including the International Monetary Fund have called for further monetary policy reforms. IMF Managing Director Kristalina Georgieva told CNBC this week that China has been advised to make greater use of available fiscal and monetary policy space.
Meanwhile, China’s declining population means its labor force is also shrinking, Bilton said, and labor is the biggest factor when it comes to economic growth. This means other companies driving economic growth are being asked to do “a lot of the heavy lifting,” he explained.
Bilton said addressing these issues is critical to increasing the confidence international investors have in China.
“I think the key will be more policy integration in terms of the direction of monetary policy, tackling the disinflation issues that are there, and also signs that the real estate issue is resolved,” he said.
But despite its problems, Bilton argued that China presents opportunities for investors.
Chinese government bonds could be one of them, he said. Part of the reason for this is the huge size of China’s bond market and the relatively small amount of international money in it, as well as the potential for disinflationary interest rate cuts, Bilton explained.
He said the stock market remains another option.
“The reality is that there is still a huge stock-picking opportunity in China. There is a lot of work to do for the economy to evolve in terms of the financial sector, addressing aging, transportation, services, etc. “That’s one of its roles,” he said. “It’s probably a case of being more focused on individual stocks.”