International capital casts another vote of confidence in China
Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".
On Tuesday the world's largest index provider, MSCI Inc., raised the weight of China A shares in its China Index from 5 percent to 10 percent, adding 26 more A shares – 18 of which are ChiNext stocks. China A shares now have an aggregate weight of 5.25 percent in the MSCI China index, and 1.76 percent in the MSCI Emerging Markets index. This move is another signal that international capital has confidence in the vitality and potential of China's economy.
The world’s largest index provider MSCI's decision on raising the inclusion factor of all large-cap China A-shares in the MSCI indexes from the current 5 percent to 10 percent takes effect on May 28, 2019. [Photo: IC]
This vote of confidence didn't come easy. Global growth is being overshadowed by a trade war and unilateralism in some parts of the world economy, causing a slew of international institutes to lower their projections for world trade and economic growth. In a recent report, the United Nations cut its global growth forecast by 30 basis points to 2.7 percent. And it lowered its forecast for trade growth to 2.7 percent, down from the 3.4 percent recorded last year. The Organization for Economic Co-operation and Development and the International Monetary Fund (IMF) have also lowered their growth projections for this year.
Against this backdrop of uncertainty, China has become a source of certainty for global growth, as it's the only country to have its economic growth forecast revised upwards by the IMF.
Despite increasing bullying from the United States since the beginning of the year, China's economy has maintained its steady progress. This has helped to boost market confidence and ensure that the country continues to be an engine driving the world economy.
Ning Jizhe, the deputy chairman of the National Development and Reform Commission, said recently that the country's overall economic growth, the operation of its market entities, employment, market prices, and the balance of international payments have been fairly stable in the first four months of the year. He also noted that China is a reliable partner in mutual development with whom other countries can cooperate and count on.
And Singapore's Deputy Prime Minister Heng Swee Keat, who has just completed a visit to China, said he's optimistic about his country's economic prospects, as China's development has not only benefited its people, but also injected a strong impetus into Asia's economic development. He said that Singapore's central location means it will benefit from the boom in regional development.
Foreign-funded enterprises make up about half of those affected by the additional tariffs imposed by the United States on imports from China. Many of them are American companies. The Atlanta-based rolled and recycled aluminum giant Novelis recently announced in Shanghai that it will invest 180 million U.S. dollars into expanding its automotive aluminum plant in Changzhou in Jiangsu Province, which will go into operation by the end of the year. Novelis will also focus on supplying Tesla's plant in Shanghai, as well as the new energy vehicle projects underway at auto giants including NIO, BYD, and SAIC. A Novelis executive said the company is still optimistic about China's prospects of having the world's biggest auto market, and hopes that the trade frictions don't disrupt the company's stable development environment.
Many other American enterprises doing business in China are also optimistic about China's economy in spite of the ongoing trade tensions. According to a survey of 250 American companies in China conducted this month by the Beijing-based American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai, over 80 percent of the manufacturing-related enterprises surveyed said the tariff increases are having a negative impact on their business but that they can cope with the added pressure by focusing more on China's domestic market.
The confidence that international organizations, foreign leaders, and multinationals have in China comes from the increasing vitality of its economy. This vitality is the result of its constantly improving infrastructure, its complete industrial system, the new and evolving technology on offer, and the massive potential of its huge consumer market. China is continuing to open more and more to the world in the pursuit of win-win cooperation, and that's clear for the whole world to see.