JH Explorer in China: Change brings opportunities
Portfolio Manager Richard Clode discusses the key takeaways from his first China trip in four years.
2 minute watch
- After many years of being the manufacturing powerhouse to the world, China is aiming to become more self-reliant, by localising its supply chains.
- Semiconductors, electric vehicle and renewal energy are among the sectors being boosted by government initiatives towards China’s massive decarbonisation programme.
- The Global Technology Leaders Team continues to closely monitor these trends, and the resulting risks and opportunities.
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Technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. A concentrated investment in a single industry could be more volatile than the performance of less concentrated investments and the market.
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As you can see I’m in China currently, and given this is my first trip after four years of enforced absence, I suppose my key takeaway was that, I’m very much feeling that effect of deglobalisation. I’ve been coming to China for the last 20 years, and certainly felt over that time that China has become more international, more open to the west, and to the world since the entry to WTO [World Trade Organization] a long time ago. And I felt that was just reversing from this trip, you know we’ve always seen China as the manufacturing sort of powerhouse of the world and everyone coming here to manufacture. But now the focus seems here to be manufacturing for themselves and very much localising supply chains, being more self-reliant.
So I spent a lot of this week meeting a lot of semiconductor companies that were feeding chips into what is the largest EV [electric vehicle] market here, in China in the world, so that EV brand in China which is taking share of that market you know wants to source their key components and chips and batteries, from local suppliers in China and we’re seeing huge government support from companies feeding into that I was going into a lot of shiny new offices with a lot of capital being provided by local governments, central governments, by local capital markets to build an awful lot of capacity to support you know the key twin prongs of EVs and renewal energy here. Not leaving too much room for some of those international players that are having to respond to that by either looking to bring manufacturing or some of their fabs [foundries] closer to China or within China.
So that for me was a big change to what we’ve seen in the past. We have seen that with smartphones, the Chinese internet sector as well. And we know that will create a lot of risk but also a lot of opportunity here within China, so we very much want to keep on top of those trends and look for those best opportunities to invest in over time.