26 BARRON’S November 22, 2021
getting enough attention from
investors and others?
Green:The pace of structural reform.
So far, [economic adviser] Liu He has
been pretty exceptional in his diagnosis
of the problems facing China and the
ways China can use its extraordinary
policy levers to try to get around them.
A policy misstep, Liu’s marginalization
within the party, or the ascension of
someone more ideological would be
large risks.
Chwang:China is keen to meet its
goals toward lower emissions over
the long term. Higher environmental
standards have discouraged new pro-
duction capacity in many parts of its
materials complex, such as steel, fab-
rics, and industrial chemicals. In the
third-quarter results, we’re seeing
some raw-material inflation pres-
sures start to show up for users of
these materials. Longer term, that is
something we have to monitor. China
doesn’t want to up the dial in produc-
ing more, due to its longer-term
climate goals, so that supply-side
dynamic isn’t going to go away.
Jain:The energy transition in China
[is a risk] because it will impact sup-
ply chains and inflation. Since 2001,
inflation has been much better be-
haved because of the ease of out-
sourcing into Asia, particularly
China. If that is coming to an end,
there are global inflation implica-
tions. Technology is the sector most
correlated to higher inflation. Ulti-
mately, China could end the party for
multiple expansion in megacap tech-
nology stocks through the inflation
channel.
Thanks, all.B
“There will
be more
inclusion of
knowledge-
based
sectors,
such as
infor-
mation
technology
and
healthcare,
within the
Chinese
equity
universe.”
Winnie ChwangWinnie Chwang
Co-manager of Matthews China Fund;
lead manager, Matthews China Small Companies Fund
Market
Recent Value Forward
Company / Ticker Price (bil) P/E
Alchip Technologies/NT$1,190$3.042
3661.Taiwan
Leader Harmonious Drive CNY158.50 3.0 80
Systems/ 688017.China
Wuxi Lead Intelligent CNY80.97 19.9 53
Equipment/300450.China
Zhongsheng Group HK$68.95 21.4 14
Holdings/ 881.Hong Kong
Forward P/E for next 12 months. Source: FactSet Photograph by María del Río