Despite the continuing US-China trade war, Asia "still has the foot on the accelerator" and investment opportunities for Kiwi businesses in China are not likely to slow.
This is the view of Andrew Bascand, managing director of investment management company Harbour Asset Management (HAM), who has just returned from a fact-finding visit to China.
He says events taking place domestically there - particularly the trend towards increasing urbanisation - is likely to fuel opportunities especially for New Zealand tech companies and protein producers.
But at the same time he warns investors not to expect Chinese trade moves to fire up the global economy as occurred in 2016 when Chinese expansion hit markets with what felt like a 'sugar rush': "China is not expected to deliver a stimulus that assists global growth; it's all about (their) local requirements."
Right now he says the growth signals in China are weak and commentators agree President Xi needs to focus on creating the 14 million new jobs needed each year to maintain full employment.
"On balance, a wait and see monetary policy stance is expected and analysts think there will be some patience to wait for trade talks to come to some point and see whether the economy responds to recent easier positions."
Bascand, who had meetings while in China with Huawei, financial services company Pin An and China Telecom, believes issues such as urbanisation, infrastructure development, the rollout of 5G and the growth of smart cities are more important to China right now.
"More than 150 million people are set to move into cities in China over the next few years, " he says. "This is a mega-trend that is occurring throughout much of Asia and it will provide opportunities. It is also, in my view, the best anchor to ride out the volatility of the trade war."
Bascand is, however, optimistic a deal will be reached on the trade war next month when US president Donald Trump and Chinese president Xi Jinping meet at the Asia-Pacific Economic Cooperation (APEC) summit in Chile - and that too is good news for New Zealand whose economy has been showing signs of slowing.
"Countries like New Zealand could be significantly buffeted by an escalation (of the trade war) but at the same time neither the US nor the Chinese economies will benefit from a continuation."
Although there is, as yet, no signature ending the war, there are hopes a truce can be achieved. Talks in Washington earlier this month produced a limited trade deal with the US agreeing to postpone a tariff rate increase while China said it would increase orders of US farm products including soybeans and pork.
Bascand says most commentators believe President Trump's demand for a reduction in the $US400 billion trade deficit is economically impossible in the near term. As a result a meaningful trade deal this year is now the most likely outcome.
"There are varying views on how Huawei has become entwined in the trade war and how technology issues could be resolved," he says. "There seems to be no doubt that, for now, China has a jump on 5G. But China also needs US companies in its technology supply chain and our meetings with Huawei and others suggested the continuing domestic roll-out of 5G is a major Chinese policy goal."
Bascand also believes an opportunity exists for New Zealand protein producers as an outbreak of deadly swine fever is decimating China's pork industry. Pork is China's favourite meat (there are 40 million pork farmers throughout the country), but 50 per cent of the nation's sows have perished.
"The fall in tonnage is in the billions," says Bascand. "China is being forced to import pork from places like Brazil and there is likely to be an increased demand for New Zealand protein products as a result."
Bascand says the domestic issues facing China are probably the reason why its response to the Hong Kong protests has been more to wait, watch and worry, rather than engage.
"Hong Kong has a population of only 7 million (out of a total Chinese population of 1.4 billion) and issues like the drop in pork production, urbanisation and transport are far more important to them. Hong Kong appears a long way down the priority list."
But Bascand says because Hong Kong is one of the world's largest financial centres and the protests have been heavily covered in the news here, the perception New Zealanders have of China tends to be shaped by events such as these.
This article does not constitute advice to any person (www.harbourasset.co.nz/disclaimer).
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