Notes from the road: Chinese companies seeking growth in the face of weakness

On a recent trip to China, 4Factor Analyst Alec So visited eight companies across five cities and walked away more optimistic about the prospects for quality companies, despite the backdrop.

13 Sept 2023

7 minutes

Alec So

The fast view

As we entered 2023, there was much excitement about China’s economy re-opening and the positive impact this would have on the broader equity market. But the anticipated recovery hasn’t happened, with optimism fading following a slew of weaker-than-expected macro data. To find out what is actually happening on the ground, I made my first trip to the mainland since before the pandemic, visiting eight companies – all holdings within 4Factor – across five cities. None of the corporate management that I spoke to expect significant stimulus measures, so it is down to the individual companies to deliver growth for shareholders. In this note, I share some observations from my meetings, and explain why I left the country feeling more positive than when I landed.

  • The Chinese reopening has been tepid at best, with a slew of weak macroeconomic data. Investor sentiment has taken a dive, but all is not lost.
  • I visited eight companies across five cities in China and walked away more optimistic about the prospects for quality companies, despite the backdrop.
  • The trend of premiumisation – consumers being willing to buy new products at a higher price point – was also very apparent, from shopping malls to train travel.
  • ESG considerations were also more prominent, aligning with the country in general. A number of green ‘Beautiful China’ initiatives were in place.

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Authored by

Alec So

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