China's new boss Xi Jinping holds the key to the next decade for investors


Meet the new boss, same as the old boss. That was the view expressed by Pete Townsend in the Who's classic Won't Get Fooled Again. It's a view that many spout about China. Leaders come and go, it is said, but the song remains the same.

But with China having become the world's second-largest economy - behind the US - the anointing of a new leader is something that will affect all investors. Even if you don't have any Chinese or Asian funds, more western companies are tying their future to China's growth which means your portfolio may depend on how well the new boss performs.

The new man in charge is Xi Jinping. The road to becoming the new President of China begins next Thursday 8 November, when the Chinese Communist Party's 18th Congress meets.

It should culminate in him being rubber-stamped as chief at the annual meeting of China's National People's Congress next March. He will hold office for 10 years, as the current incumbent has.

So what will the change at the top mean for investors? "The leadership change is an historic event and one that will help further cement China's place among the world's great economic powers," says Martha Wang, portfolio manager of the Fidelity China Focus fund.

"It will remove the political shackles that have been holding back the markets. The new leadership will focus on the quality rather than quantity of growth. This means a continued focus on the domestic consumer and further enforces the structural growth opportunities in consumer related stocks."

Virginie Maisoneuve, head of global and international equities at Schroders says the completion of the current leadership transition in China is key to the global economy.

"Beyond 2017, there's expected a slowdown in China due to its size and demographic trends. So many argue that a democratisation of the governing party of China would be wise in order to maintain stability in a country where communication modes have changed dramatically. Will the new leadership team bring China closer to democracy? Global investors will be wise to watch closely," she says.

Gigi Chan, manager of the Threadneedle China Opportunities Fund believes the ending of political uncertainty in the country will being rapid benefits to investors.

"The key for investments is certainty and after months of policy paralysis more clarity on the top leadership will be positive for markets in the short term," she predicts. "The incoming leadership can focus on pushing through policies once their power base is consolidated."

She believes that there will be political change in China with Xi Jinping looking to head a Politburo Standing Committee that is more pro-reform. "Looking further out, this has to be positive for investments. For the past decade or so the consensus has been that political change in China is unlikely. In fact political and economic reforms have gone backwards.

"The scenario that the pendulum might swing back is now increasingly likely," says Chan. "Certainly the new leadership realizes the importance of structural changes to maintain longer term economic growth. There has been more talk of reforms – to deregulate industries and introduce more market driven policies."

She warned that the reforms may not be positive for big blue caps such as banks and other large-listed state-owned enterprises. "But they will be positive for the economy as a whole longer term, as well as for the private sector. The main risk here is one of execution."

Any stability brought by the new leadership will be seen as a positive, says Juliet Schooling Latter, head of fund research at Chelsea Financial Services. "The economy has slowed, but growth is still at a respectable rate and the envy of all developed markets.

"The market has been oversold and it is one of the cheapest in emerging markets, so for long-term investors it offers opportunities and we could well see an up-tick in growth next year if the fiscal cliff is avoided and eurozone worries are kept under control."

Ahead of the change in leadership, Chinese equities enjoyed a bounce in October although they have been one of the worst performing sectors year to date, says Robert Morgan, investment analyst at Hargreaves Lansdown.

Neptune China was the top-performing fund in October - up 7.95 per cent - with eight other Chinese funds making up the top 10 over the month according to figures from Lipper.

Juliet Schooling Latter recommends the First State Greater China fund and, for more diversified plays, Fidelity Emerging Asia - which is 30 per cent weighted in China – and JP Morgan Global Emerging Markets which is 20 per cent weighted in China.

But the potential opportunities in the region should not mean just snapping up local-focused funds or shares, says Virginie Maisoneuve.

"Investors should not focus only on Chinese- or Hong Kong-listed securities to tap into Chinese economic growth, but look for streams of earnings in global and local companies, wherever they are listed."

"Some of the best ways to play the on-going changes in Chinese society and growth opportunities remain in the insurance, consumer and selected commodities areas," she says.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Suggested Topics
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

    Day In a Page

    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones
    Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

    Why are we addicted to theme parks?

    Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
    Tourism in Iran: The country will soon be opening up again after years of isolation

    Iran is opening up again to tourists

    After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
    10 best PS4 games

    10 best PS4 games

    Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
    Transfer window: Ten things we learnt

    Ten things we learnt from the transfer window

    Record-breaking spending shows FFP restraint no longer applies
    Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

    ‘Can we really just turn away?’

    Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
    Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

    Nine of Syria and Iraq's 10 world heritage sites are in danger...

    ... and not just because of Isis vandalism
    Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

    Girl on a Plane

    An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent