Commentary: China’s long-term prospects as a top investment destination haven’t been derailed

SINGAPORE: China is top of every investor’s mind, as they try to understand its policy shift towards “common prosperity”.

Such policies range from curbing working hours for technology sector employees, to a ban on for-profit tuition and designated video-gaming hours for minors.

This series of policy upheavals is pushing up the risk premium in China asset markets, wiping out trillions from market valuations.

Shocking as this has been however, China’s long-term growth prospects have not been derailed when you consider the deeper ambitions for more sustainable development and inclusive growth undergirding these changes.

One should not forget China’s economic miracle over the past four decades occurred under a hybrid of capitalism and socialism.

Growth may have been uneven in recent years, deepening income inequality, especially between urban and rural areas, and worsened by the pandemic.

Common prosperity hence signals China’s changing focus from “growth first” to “quality first” and aims to balance economic gains and sustainable development, for inclusive growth. To power its economy, all segments of the population – especially lower-income households and less-developed cities – must grow together, the thinking goes.

But China is pressing on with its ambitious Vision 2035 plan to double gross domestic product in the next decade – no easy feat for a fairly mature economy.

With a slowdown in momentum, China is likely to tread cautiously. It recognises that the private sector has been a vital engine of growth and jobs, making up more than 60 per cent of the economy and 70 per cent of technological innovations.  

COMMON PROSPERITY FOR LONG TERM GAINS DESPITE SHORT TERM PAINS

Recent moves on its technological giants are unlikely to reduce the sector’s overall competitiveness despite short terms pains and ties closely with China’s new dual circulation plan, focused on growing the economy both domestically and externally.