BNP Paribas Asset Management bullish on Chinese equities in Year of the Ox

February 19, 2021
  • Chinese economic recovery set to continue: GDP growth of 8.1% forecast for 2021[1] following 2.3% rise in 2020[2]
  • BNPP AM’s Head of Greater China Equities believes China's global economic role and innovation are underestimated: long-term growth drivers expected to be technological and financial innovation, and industrial consolidation
  • Positive outlook for BNP Paribas China Equity fund: focus on long-term investment opportunities

China’s economic growth is set to accelerate in 2021 as the recovery continues to be led by the three main pillars of Technology, Sustainability and ‘Dual Circulation’, as set out in China’s 14th Five Year Plan.  The Chinese economic recovery story is best summed up by ‘first in, first out’; helped by its effective COVID-19 controls and effective stimulus measures, the rebound has been earlier and quicker than that of other major economies.

Controlled monetary and fiscal policy during 2020 has provided China with the reserves to enable it to respond to any COVID-19 resurgence or increased geopolitical tensions.  The 2.3% rise in real GDP was achieved without the authorities having to suppress interest rates through quantitative easing or to increase the government debt burden by stimulus spending.

The introduction of the ‘Dual Circulation’ concept in the 14th Five Year Plan signifies a policy shift towards a focus on boosting domestic growth and high-tech infrastructure investment.  The emphasis on the green economy, climate control and manufacturing revitalisation is expected to benefit sectors in new infrastructure spending and technological innovation, as well as environmental protection, water conservation projects and renewable energy.

David Choa, Head of Greater China Equities at BNP Paribas Asset Management, comments:

"Many investors still underestimate the global economic role and innovative strength of China, and significantly underweight it in their portfolios.  The ‘Dual Circulation’ strategy suggests that domestic demand growth, import substitution and technological self-sufficiency look set to be key macroeconomic drivers for investment opportunities in China in the coming years.

“Overall, we are cautiously positive on the medium-term outlook for China based on solid fundamental and technical drivers, while remaining mindful of the current valuation level due to high liquidity and strong optimism in the market.  We expect greater divergence between the winners and losers in 2021 and therefore remain selective in our stock picking.”

Growing innovation and sustainable investment opportunities

With data consumption on the rise, Chinese spending on 5G is forecast to be USD 184 billion between now and 2025, according to the Global System for Mobile Communications Alliance (‘GSMA’).  The GSMA also estimates that by the same time there will be almost 1.5 billion smartphone users in China[3].  This could result in a major productivity boost that eases the pressure of rising labour costs.  The size of the domestic market, higher R&D spending and a vast talent pool will also support the shift to high-end manufacturing.

There are growing opportunities to invest sustainably in China, where there has been significant investment in climate protection and renewable energy.  According to the Chinese Energy Authority, wind power plants with a capacity of almost 72 gigawatts were built last year, almost three times as much as in 2019, and this trend is growing as China looks to achieve its target of becoming climate-neutral by 2060.

David Choa adds:

"I believe there is a lot of growth still to come.  With the shift from cheap labour-based manufacturing towards medium- to high-end manufacturing, the technology focus has begun to transition from consumer to enterprise applications.  Beneficiaries of this theme go beyond the traditional technology enablers and provide corporates with the potential to consolidate the market.  We are also seeing Chinese consumers evolving and targeting a better lifestyle rather than premium products, which is underpinning growth beyond traditional retail sectors.”

Companies related to rapid advancement in industrial, technology and life science sectors, as well as to upgrades in lifestyle and consolidation across both old and new economy sectors, are well represented in the BNP Paribas China Equity fund, managed by David Choa.  The USD 2.7 billion[4] fund consists of a concentrated portfolio of 40-60 holdings and follows an active, high conviction, bottom-up Growth at a Reasonable Price (‘GARP’) approach.  With a proprietary ‘Growth Framework’ portfolio allocation model and a disciplined fundamental-driven process into which ESG is fully integrated, the fund is designed to benefit from Chinese economic growth and fast-moving dynamics.

For further information about BNPP AM’s outlook for the Chinese equity market, please see our recent paper entitled Asia & China Equities 2021 outlook in 3-D: Domestic, Digitalisation, Diversification, available on our website here:

- ENDS -



  1. ^ [1] Source: International Monetary Fund World Economic Outlook, January 2021
  2. ^ [2] Source: National Bureau of Statistics of China, January 2021
  3. ^ [3] The Mobile Economy Asia Pacific 2020:
  4. ^ [4] Source: BNP Paribas Asset Management as at 10 February 2021

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As at February 2021