Disclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it.Play videowww.research.hsbc.comFebruary 2022Multi-AssetChinaChina in theYear of the TigerProsperity, opportunity, sustainabilityAfter a real estate crunch, policy crackdowns and supply chain disruptions……we explain why we are more optimistic about 2022 and……provide a one-stop shop for our macro and equity views on China
0Work in progress, from 2021 to 2022Change of growth modelProperty investment: annual growth rate to halve to 3-4% in the next five yearsGreen and higher-end manufacturing to rise China’s great transition: from construction to capex and consumption. Page 11 Real estate tightening: property high-yield bonds –Survival of the fittest. Page 75 Green investment: ESG and climate policy. Page 29 Higher-end manufacturing: Smart manufacturing to fuel capex. Page 69Common prosperityMiddle class: <30% of populationWhen this ratio hits 50%, private consumption to contribute about 60% of GDP The road to common prosperity: reduce inequality and revive competition. Page 13 Common prosperity and tax reforms. Page 71 Richer households: China’s rising wealth. Page 51 Tech: Internet – A new playbook. Page 41Reducing risk/deleveragingProperty and related sectors: 25% of GDPLGFVs with outstanding bonds: Total assets >RMB100trn Decoupling: A closer look at technology imports. Page 61 Demographics: How worrying is slowing population growth? Page 63 High leverage: China’s rising debt – how big is the risk? Page 65
1Multi-Asset ● ChinaFebruary 2022Greater focus this yearEasing to support growthGreen investment: RMB200trn over 2022-2060Higher-end manufacturing: 60% of all manufacturing by 2030 China in 2022 – Five macro themes. Page 9 A switch-up in investment. Page 49 Time for a tech and green stimulus package. Page 67 Stepping up target easing. Page 47Tiger macro outlookUSD/RMB: 6.40 at end-Q1, 6.55 at end-Q49-16% index upside for A shares in 2022e Credit: China Onshore Insights – 2022 outlook. Page 17 FX: RMB overstretching. Page 19 Rates: Onshore China – Off to a roaring start. Page 21 Equity strategy: 2022 outlook. Page 105Investment compassSustainability, manufacturing, consumption Green: ESG Integrated – Utilities. Page 31 Green: Electric vehicles – Taking it up a notch. Page 39 Manufacturing: Automation – Gear up for growth. Page 33 Manufacturing: Printed circuit boards. Page 143 Consumption: Consumer – Silver dollars, the she-economy, Gen-Z style. Page 37 Consumption: Cosmetics – Time to shine for local brands. Page 127
Multi-Asset ● ChinaFebruary 20222We expect Beijing to introduce more targeted easing measures –support for green investments, small businesses and manufacturers, and tax incentives and subsidies to promote ...
