Americas
Europe
Asia
Karen Ward
London
Dr. David Kelly, CFA
New York
Tai Hui
Hong Kong
Chaoping Zhu,
CFA
Shanghai
David Lebovitz
New York
Gabriela Santos
New York
Michael Bell, CFA
London
Vincent Juvyns
Luxembourg
Marcella Chow
Hong Kong
Meera Pandit, CFA
New York
Jack Manley
New York
Hugh Gimber, CFA
London
Tilmann Galler, CFA
Frankfurt
Ian Hui
Hong Kong
Jordan Jackson
New York
Stephanie Aliaga
New York
Max McKechnie
London
Maria Paola Toschi
Milan
Adrian Tong
Hong Kong
Shogo Maekawa
Tokyo
Olivia Schubert
New York
Nimish Vyas
New York
Natasha May
London
Elena Domecq
Madrid
Sahil Gauba
Mumbai
Agnes Lin
Taipei
Zara Nokes
London
Lucia Gutierrez Mellado
Madrid
Clara Cheong
Singapore
Kerry Craig, CFA
Melbourne
GDP size of China and U.S.
Real GDP per capita and urbanization ratios
Constant
Constant prices,
prices, U.S.
U.S. dollars,
dollars, 1960
1960 –
– 2030**
2030**
GDP
GDP size,
size, billions,
billions, current
current prices,
prices, U.S.
U.S. dollars
dollars
$40,000
$40,000
$30,000
$30,000
$25,000
$25,000
8
8
China
China
contribution
contribution
to
to global
global
growth
growth
1%
1%
1990s
1990s
8
8
21%
21%
2000s
2000s
5
5
15%
15%
2010s
2010s
2
2
32%
32%
2020s
2020s
2
2
28%
28%
2031
2031
1
1
30%
30%
Decade
Decade
1980s
1980s
China
China
GDP
GDP
ranking
ranking
$20,000
$20,000
$15,000
$15,000
2030
$60,000
2020
$50,000
Real GDP per Capita
$35,000
$35,000
$70,000
Forecast*
Forecast*
$40,000
U.S.
$30,000
$20,000
2030
$10,000
$10,000
2020
South
Korea
$10,000
China
$5,000
$5,000
India
$0
$0
$0 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '22 '25 '28 '31
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '22 '25 '28 '31
15
35
55
75
Urbanization Ratio
95
Growth of the middle class
Regional contribution middle class growth: 2020 to 2030
% of total population
Millions of people
100%
1,800
1995
2020F
2030F
32
1,600
79%
80%
-3
57
80
79%
1,400
73%
72%
10
Rest of
Asia, 133
1,200
China,
453
61%
60%
55%
41%
1,000
800
41%
40%
40%
600
30%
30%
400
21%
India,
883
20%
200
4%
1%
0
0%
Asia Pacific
0%
India
Indonesia
China
Brazil
Mexico
Sub-Saharan
Africa
Middle East
and North
Africa
Central and North America
South America
Europe
Contribution to potential growth
Percentage points, real growth rate
15%
TFP
Labor
13%
TFP
Labor
Capital
Potential GDP
Growth
Capital
2000-2007
4.1
1.6
4.4
10.2
Actual GDP Growth
2008-2015
2.4
1.7
4.8
9.0
2016-2020
1.9
0.5
3.6
6.0
2021-2025
2.5
0.1
2.6
5.3
2026-2030
2.4
-0.1
2.0
4.4
11%
9%
7%
5%
3%
1%
-1%
'90
'95
'00
'05
'10
'15
'20
'25
'30
Share of GDP by sector
% of nominal GDP
60%
2021: 53.3%
Agriculture
Manufacturing
Services
50%
2021: 39.4%
40%
30%
20%
2021: 7.2%
10%
0%
'78
'83
'88
'93
'98
'03
'08
'13
'18
Contribution to real GDP growth
Year-over-year change
24%
20%
3Q21 4Q21 1Q22 2Q22
Gross capital formation (investment)
Consumption
Gross capital formation (Investment) 0.4% -0.5% 1.3%
Net exports
Consumption
0.7%
1.1%
3.3% -0.8%
GDP
Net exports
3.8%
3.4%
0.2%
1.0%
Total GDP
4.9%
4.0%
4.8%
0.4%
16%
0.3%
12%
YTD 2022:
2.5%
8%
4%
0%
-4%
-8%
1978
1983
1988
1993
1998
2003
2008
2013
2018
Total exports and imports
China’s exports by product
% of GDP
Share of total exports
40%
50%
35%
Machinery and Electronics
Exports
30%
45%
25%
2021: 19.3%
20%
15%
Imports
10%
40%
35%
2021: 11.8%
5%
30%
0%
'81
'85
'89
'93
'97
'01
'05
'09
'13
'17
'21
25%
Current account balance
% of GDP
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
20%
Textiles and Clothing
15%
2021:
1.8%
10%
Metals
Transportation
5%
Chemicals
0%
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19
'92
'95
'98
'01
'04
'07
'10
'13
'16
China’s share of global trade
China’s major trading partners
China exports and imports as % of world total, goods only
U.S. dollars, billions, rolling 12-month sum, goods only, as of Jun. 2022
16%
-$500
2021:
15%
-$300
-$100
$100
$300
$500
U.S.
$700
$474
14%
$358
Hong Kong
12%
Share of world
exports
2021:
12%
EU
$269
ASEAN
10%
Share of world
imports
$112
India
$94
8%
UK
6%
$45
Canada
$30
Japan
4%
-$38
South Korea
-$60
2%
Brazil
-$64
Imports
Exports
0%
Taiwan
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19
-$194
Trade balance
Contribution to global consumption growth
China’s contribution to global spending on luxury goods
Household consumption, constant U.S. dollars
Chinese consumers, % of total, both domestic and overseas spending
China
U.S.
Europe
50%
Rest of world
40%
100%
40%
35%
32%
30%
90%
26%
80%
39%
20%
42%
51%
57%
70%
10%
0%
15%
2012
60%
50%
19%
2018
2020
2025F*
China’s Singles’ Day vs. U.S. holiday sales
11%
18%
Gross merchandise value, U.S. dollar, billions
$90
13%
40%
7%
36%
$75
$60
35%
20%
$30
8%
10%
2000
2005
Thanksgiving Sat. & Sun.
$45
26%
20%
23%
22%
0%
2015
2019
$0
$44.8
$35.7
$28.5 $30.8
$10.2
$15
2010
$74.1
China Singles' day
16%
10%
Cyber Monday
Black Friday
25%
30%
$84.5
Prime Day
$6.2
$7.9
$4.2
2018
$38.4
$11.6
$7.4
$9.4
$7.2
2019
$40.0
$14.5
$9.2
$9.0
$8.9
$10.8
$10.7
$10.4
$11.2
2020
2021
Household
Householdsavings
savingsrate
rate
Household
savings
rate
Household wealth
wealth by
by asset
asset type
type
Household
wealth
by
asset
type
Household
%
%household
householddisposable
disposableincome,
income,latest*
latest*
%
household
disposable
income,
latest*
40%
40%
40%
35%
35%
35%
30%
30%
25%
25%
25%
20%
20%
20%
15%
15%
15%
10%
10%
10%
5%
5%
0%
5%
0%
0%
% of
oftotal,
total,as
as of
of Dec.
Dec.2019
2019
%
of
total,
as
of
Dec.
2019
%
36%
36%
36%
100%
100%
4%
4%
4%
Japan
Japan
Japan
7%
7%
7%
8%
8%
8%
UK
UK
UK
U.S.
U.S.
U.S.
13%
13%
13%
15%
15%
15%
90%
90%
Euro
Mexico
Euro
Mexico
Area
Euro
Area Mexico
Area
China
China
China
5%
5%
3%
3%
22%
22%
12%
12%
70%
70%
2%
2%
4%
4%
23%
23%
17%
17%
32%
32%
50%
50%
Euro Area
Area
Euro
Japan
Japan
U.S.
U.S.
China
China
UK
UK
Mexico
Mexico
28%
28%
40%
40%
30%
30%
15%
15%
66%
66%
73%
73%
15%
15%
20%
20%
10%
10%
30%
30%
10%
10%
5%
5%
0%
0%
2000
2000
19%
19%
1%
1%
9%
9%
Cash &
& deposits
deposits
Cash
Insurance
& pension
pension
Insurance &
Others
Others
60%
60%
Incash,
cash,%
%of
ofGDP
GDP
In
cash,
%
of
GDP
In
20%
20%
4%
4%
1%
1%
3%
3%
7%
7%
80%
80%
Social benefits
benefits to
to households**
households**
Social
benefits
to
households**
Social
25%
25%
Property
Property
Equity &
& mutual
mutual fund
fund
Equity
Other securities
securities
Other
2004
2004
2008
2008
2012
2012
2016
2016
2020
2020
0%
0%
China
China
Korea
Korea
Taiwan
Taiwan
24%
24%
U.S.
U.S.
China’s share of pre-tax national income
Top 10%’s ownership of national income and wealth*
50%
100%
Middle 40%
44.0%
45%
90%
79%
80%
40%
41.7%
70%
35%
62%
Top 10%
60%
30%
50%
49%
46%
45%
25%
42%
41%
40%
37%
36%
Bottom 50%
32%
30%
30%
15%
20%
14.3%
10%
10%
'78
'82
'86
'90
'94
'98
'02
'06
'10
'14
'18
Japan
France
UK
Norway Germany
China
Wealth
Income
Wealth
Income
Wealth
Income
Wealth
Income
Wealth
Income
Wealth
Income
0%
Income
0%
5%
Wealth
20%
55%
53%
52%
U.S.
Total population
Crude birth and death rate
Billion people
1.6
Per 1,000 people
30
Forecast
Forecast
1.4
25
Birth rate
1.2
Death rate
20
1.0
0.8
15
0.6
10
0.4
Total population
5
Urban population
0.2
0.0
0
'90
'95
'00
'05
'10
'15
'20
'25
'30
'35
'40
'45
'50
'80 '85 '90 '95 '00 '05 '10 '15 '20 '25 '30 '35 '40 '45 '50
Patent applications
Research and development
# of PCT patent filings*
Expenditures as % of GDP
80,000
4%
United States
Japan
70,000
Germany
China
3%
60,000
50,000
2%
40,000
30,000
1%
20,000
United States
Japan
10,000
Germany
China
0
0%
'96
'01
'06
'11
'16
'21
'96
'00
'04
'08
'12
'16
'20
Current self-sufficiency rate amongst different technology products
Percentage points
100%
Higher technology
entry barrier
ERP software
Cloud IaaS
PCB
Software related
Industrial products
Self-sufficiency rate
Semiconductors/ integrated circuit related
50%
Wafer fabrication (non-advanced)
Laser generator
Office software
Robotics
Inverter
IC assembly & testing
CMOS image sensor
Wafer cleaning Eq.
Speed reducer
Power IC
RF IC
0%
Technology entry barrier
Etching Eq.
IC substrate
CPU
Lithography Eq.
Wafer fabrication
(advanced)
Greenhouse gas emission targets
China’s energy mix
% of primary energy
Billion tonnes/year, CO2 equivalent
18
Current
policy
forecast
16
100%
Forecast
Forecast
Path to net zero
90%
80%
14
China
70%
12
60%
10
50%
8
40%
U.S.
30%
6
EU
20%
4
10%
2
0%
'95
0
1990
2000
2010
2020
2030
2040
2050
2060
Oil
'00
'05
Coal
'10
Gas
'15
'20
Hydro
'25
'30
Nuclear
'35
'40
'45
Renewables*
'50
China’s GDP per capita vs. Five Year Plans (FYP)
Nominal, U.S. dollars
$20,000
$16,000
11th FYP:
• Quantitative targets
• 7.5% annual GDP
growth
• Increase services’
share in GDP and
employment
• Create 45mn jobs
$12,000
$8,000
10th FYP:
• 7% GDP growth
• Boost international
competitiveness
• Balance external
position
$4,000
13th FYP:
• Innovation
• Environment
• Supranational
• Reform one-child
policy
• New urbanization
12th FYP:
• Rebalance to
consumption from
investment
• Shift coastal cities
from manufacturing
to R&D and
services
• Expand highways
and highspeed
railways
• Prudent monetary
policy and curb
housing prices
Forecast*
14th FYP:
• Expand domestic
demand while
keeping development
of external sectors
• Improve selfsufficiency of key
technologies and
products
• Promote common
prosperity
• Environmental
protection
$0
'00
'05
'10
'15
'20
'25
Policy Principles
China’s State Council Committee encourages regulators to establish more transparent and predictable policies (03/2022)
CCP’s Politburo advocated to stabilize growth, with supports to infrastructure investment, property market and internet platforms (04/2022)
Property
Three red-line rules introduced to restrict
borrowing for developers that breached 3
debt criteria: (1) total liabilities/asset ratio
>70%; (2) net gearing >100%; and (3) cash
to short-term debt ratio of 1 (08/2020)
Central government issued guidance to
monitor the property sector; Local
governments tighten purchase restrictions
measures (07/2021)
PBoC pledges to support homebuyers and
promote healthy development of the real
estate market (12/2021) . Local level
easing measures were introduced, for
example, home purchase restrictions were
loosened while down payment ratio as well
as mortgage rates were also lowered in
various cities (01/2022 – 03/2022)
China State Council approves the set up of
a fund to support distressed property
developers. Initial fund size is set at USD
11.8 billion, but may rise to USD 44 billion,
and will be used to buy and complete
construction projects (07/2022)
Health Care
Government expanded the scope of
centralized pharmaceutical procurement in
order to cap the cost of public health care
(10/2021)
Education
Policy aimed at reducing burdens of
students and families is issued: New
regulations on after-school tutoring
industry include: (1) companies can only
be registered as non-profit organizations;
(2) approvals for new companies were
banned; and (3) illegal for companies to
receive foreign investment/ raise capital/
go public. (07/2021)
Energy
State Council announced measures that
includes ramping up coal capacity, raising
tariffs so as to tackle power shortages
(10/2021)
After the power shortage in 3Q21, the
government tuned down the pace of coal
reduction by stressing that “coal is still the
key power source in China” (12/2021)
The National Development and Reform
Committee released the Energy
Development Plan for “14th Five-Year”,
with more visibility on nuclear and
hydropower development (03/2022)
Internet
Enhance data security: Didi was banned
from app stores due to violation of personal
data collection and usage (07/2021). Didi
fined for breaching data security laws
(07/2022)
Antitrust: Internet giants such as Alibaba,
Meituan and Tencent were fined on
monopolistic practices (04/2021 – 07/2022)
Social responsibility and labor rights
matters: Instructions on food delivery
platforms’ responsibility to protect delivery
riders’ interests were released so as to
address social security and labor rights
matters (07/2021 – 09/2021); Food delivery
platforms were guided to lower the service
fees they charged to meal vendors
(02/2022)
Gaming: Online gaming companies will be
banned from offering minors (those under
age 18) access to games during weekdays
(08/2021). China resumes gaming license
approval (04/2022)
Live streaming platforms: Tighten scrutiny
on marketing activities; Enhance control of
account registration; Crackdown on tax
evasion; Cap consumer spend on virtual
tipping (03/2022)
Foreign investor investments into onshore Chinese equities and bonds
Foreign investor outstanding holdings, USD billion
$20
Bond holdings
Equity holdings
Date
11/2002
11/2014
07/2015
$16
12/2016
06/2017
07/2017
09/2018
01/2019
09/2019
10/2020
06/2021
09/2021
07/2022
01/2023
$12
Key capital market developments in China
China opens its domestic stock market via Qualified Foreign Institutional Investor program
Launch of Shanghai North and Southbound Stock Connect*
China allows foreign central banks, international financial organizations and
sovereign wealth funds to enter domestic bond market
Launch of Shenzhen North and Southbound Stock Connect*
MSCI announces plan to include China A-shares in global indices
Launch of Northbound Bond Connect**
FTSE Russell announces plans to include China A-shares in global indices
Bloomberg announces inclusion of Chinese RMB denominated bonds into global indices
China lifts quota for QFI*** programs
Launch of ETF cross listing in Shenzhen
Launch of ETF cross listing in Shanghai
Launch of Southbound Bond Connect**
Launch of ETF Connect
Proposed launch of Swap Connect
$8
Capital market
reform developments
$4
$0
'14
'15
'16
'17
'18
'19
'20
'21
BEV* and PHEV** in use, by region
Publicly accessible electric light duty vehicle charging points
Millions
20
Thousands
1,800
Countries/Regions
China
Europe
U.S.
Rest of the world
15
10
2021
7.8
5.4
2.1
1.2
160
1,600
Countries/Regions
China
Europe
U.S.
Rest of the world
1,400
5
CAGR****
2015-2021
53%
27%
20%
30%
114
356
115
1,200
0
99
2015
2016
2017
2018
2019
2020
2021
1,000
274
BEV* and PHEV** historical and projected sales***, by region
BEV* and PHEV** share of total car sales
89
800
30%
77
Projected
Countries/Regions
China
Europe
U.S.
25%
20%
2021 2025*
16% 28%
17% 26%
5%
11%
400
15%
10%
200
5%
0%
0
'15
'16
'17
'18
'19
'20
212
600
'21
'22
'23
'24
'25
30
26
38
122
32
67
59
141
2015
2016
49
43
807
152
133
214
2017
1,147
68
54
516
275
2018
2019
2020
2021
Price
around
thethe
globe
Price to
to income
incomeratios
ratiosfor
formajor
majorcities
cities
around
globe
China
investment
China and
andU.S.
U.S.residential
residentialreal
realestate
estate
investment
Ratio
income, years
years
Ratio of
of median
median apartment
apartment prices
prices to
to median
median family
family disposable
disposable income,
of
of income,
income, as
as of
of Jan.
Jun. 2022
2022
USD
USD billions
billions and
and %
% of
of nominal
nominal GDP
GDP
$1,800
20%
% of GDP
Billion $
18%
$1,600
China ($Bn)
U.S. ($Bn)
China (% GDP)
U.S. (% GDP)
55x
60x
50x
43x
40x
40x
42x 42x
14%
40x
35x
12%
30x
$1,200
$1,000
10%
$800
8%
$400
$200
$0
21x
20x
20x
15x
4%
10x
10x
5x
2%
0x
0x
0%
'03
'05
'07
'09
'11
'13
'15
'17
'19
'21
39x
34x
30x
25x
$600
6%
47x
52x
50x
45x
16%
$1,400
52x
56x
20x
21x 20x 17x
16x
18x
15x
17x 16x
13x
14x 12x 12x
10x
12x
10x 10x 7x
6x
China–U.S. economic relations
U.S.
who feel
“cold” towards China*
U.S.voters
and China
relationship
%%ofofU.S.
voters
who
have
an have
unfavorable
opinionopinion
of China
U.S. adults who say they
an unfavorable
of China*
Plans to move production out of China in the next 3 years
90%
100% Democrat/Lean Democrat
79%
Republican/Lean Republican
80%
Total
80%
67%
Republican / Lean Republican
70%
60%
61%
57%
60%
40%
Democrat / Lean Democrat
46%
50%
20%
38%
40%
0%
30% '05
'07
'09
'11
'13
'15
'17
'19
2018
2021
80%
Of companies with production capacity in China, % considering moving**
83%
72%
70%
68%
60%
50%
40%
Foreign direct
Foreign
directinvestment
investment
USD billions
billions
USD
30%
$20
ChinaFDI
FDIinto
into U.S.
U.S.
China
U.S. FDI into China
$15
20%
$10
11%
8%
10%
$5
$0
3%
4%
Move
21-30%
Move
over 30%
2%
0%
-$5
-$10
'03
'05
'07
'09
'11
'13
'15
'17
'19
Not
planning to
move
Move
1-10%
Move
11-20%
Move
all
production
Confirmed new cases
Covid-19 vaccine rollout
7-day moving average
Total vaccine doses administered per 100 people
35,000
1,500,000
China
EU
1,350,000
30,000
China
240
220
As of Jul. 2022
25,000
260
U.S.
China
686
U.S.
131,928
EU
355,214
1,200,000
EU
200
1,050,000
900,000
U.S.
180
160
20,000
140
750,000
120
15,000
600,000
450,000
10,000
100
80
60
300,000
40
5,000
150,000
0
Jan-'20
Jul-'20
Jan-'21
Jul-'21
Jan-'22
0
Jul-'22
20
0
Dec-'20
Mar-'21
Jun-'21
Sep-'21
Dec-'21
Mar-'22
Jun-'22
New COVID-19 cases* and Chinese airline mobility
New COVID-19 cases* and road transport freight volume
Cases** (log scale)
Cases** (log scale)
Index for flights: 2019 average =100
100,000
140
New COVID-19 cases
(7-day moving average)
Road transport freight volume (billions of tons)
100,000
4
New COVID-19 cases
(7-day moving average)
Domestic flights
International flights
Freight volume
3.5
120
10,000
10,000
3
100
2.5
1,000
1,000
80
2
60
100
100
1.5
40
1
10
10
20
1
Mar '20
0
Sep '20
Mar '21
Sep '21
Mar '22
0.5
1
Mar '20
0
Sep '20
Mar '21
Sep '21
Mar '22
Manufacturing PMIs
Services PMIs
Index
60
Index
65
NBS
July
2022:
55.5
Caixin/Markit
60
July
2022:
53.8
55
55
50
50
July
2022:
49.0
July
2022:
50.4
45
45
40
NBS
Caixin/Markit
35
40
30
35
25
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Keqiang Index
Components of Keqiang Index
Index, year-over-year change, 3-month moving average
35%
Year-over-year change, 3-month moving average
50%
30%
40%
Industrial electricity consumption
Mid- to long-term loans
25%
30%
20%
20%
15%
10%
10%
0%
5%
Railway cargo volume
-10%
Jun.
2022:
6.3%
0%
-20%
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Fixed asset investment
Fixed asset investment by sector
Year-over-year change, year-to-date
Year-over-year change, year-to-date
40%
40%
Jun. 2022
Aggregate
Public
Private
30%
y/y
6.1%
9.2%
3.5%
30%
20%
20%
10%
10%
0%
0%
Jun. 2022
y/y
Real estate
-5.4%
Manufacturing
10.4%
Infrastructure (excl. electricity) 7.1%
-10%
-10%
-20%
-20%
-30%
-30%
-40%
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Retail sales
Automobile sales
Year-over-year change
35%
Millions of units, saar
30
30%
25%
China
U.S.
Euro Area
25
Jun. 2022
27.7
13.0
7.3
20%
15%
20
Jun.
2022:
3.1%
10%
5%
15
0%
-5%
10
-10%
-15%
5
-20%
-25%
0
'15
'16
'17
'18
'19
'20
'21
'22
'07
'09
'11
'13
'15
'17
'19
'21
Chinese consumer sentiment
PBOC depositor survey*
Percentage among respondents
30
60
Plans to increase spending
Income sentiment index
58
28
56
26
54
24
52
22
50
20
48
18
46
16
44
14
42
12
40
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Urban registered unemployment rate*
Urban survey unemployment rate
Quarterly
4.5%
6.5%
Monthly
4.3%
6.0%
4.1%
4Q21:
4.0%
5.5%
Jun.
2022:
5.5%
3.9%
5.0%
3.7%
3.5%
4.5%
'06
'08
'10
'12
'14
'16
'18
'20
'18
'19
'20
'21
'22
Online share of goods sales
Online goods sales breakdown
% of total goods sales, year-to-date
Year-over-year change, year-to-date
30%
70%
Jun. 2022:
25.9%
Online sales of:
Jun. 2022
Food
15.7%
Daily use products
5.1%
Apparel
2.4%
60%
25%
50%
40%
20%
30%
15%
20%
10%
10%
0%
-10%
5%
-20%
0%
-30%
'15
'16
'17
'18
'19
'20
'21
'22
'16
'17
'18
'19
'20
'21
'22
Property prices and land sales
Structure of bank loans
Year-over-year % change
Outstanding loans, % of nominal GDP
30%
110%
180%
Land sales (year-to-date)
25%
Mortgage loans
90%
20%
70%
Property development loans
Other loans
160%
140%
120%
50%
10%
8
30%
5%
26
29
34
12
11
10
10
10
31
18
15
100%
35
34
21
15%
37
15
17
15
7
7
8
10
11
11
9
80%
10%
0%
121 123 122
60%
93
-10%
-5%
90
94
97
100
106 107 106 106 110
40%
-30%
-10%
20%
Residential property prices
(3-month moving average)
-15%
-50%
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
0%
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 ‘21 YTD
'22
Goods trade
Balance of trade
Year-over-year change, 3-month moving average
USD billions, 3-month moving average
80%
$90
Jun. 2022
Imports
Exports
y/y
1.0%
17.9%
June 2022: $75.9bn
$80
$70
60%
$60
$50
40%
Goods
$40
$30
$20
20%
$10
$0
0%
-$10
Services
Jun 2022: -$7.4bn
-$20
-20%
-$30
'15
'16
'17
'18
'19
'20
'21
'22
'15
'16
'17
'18
'19
'20
'21
'22
China/U.S.
tradetensions
tensions
China/U.S. trade
Phase II trade
progress
Phase
tradeagreement
agreement
progress
Goods
export value,
dollars,
rolling
months,June
June2018
2018=100
Good export
value U.S.
in USD,
rolling
1212
months,
= 100
Chinese import
import data,
data, USD,
USD billions,
Chinese
billions, as
as of
of Dec.
Dec. 2021
2021
135
$130
$350
130
$125
U.S. & China
U.S. &25%
China
impose
impose
tariffs on25%
$34Btariffs
goods
on of
$34B
of goods
First-stage trade
First-stagesigned
trade
agreement
agreement signed
120
$115
115
$110
110
$105
105
$100
100
$95
95
$90
90
$85
85
$80
80
$75
75
$70
70
$65
65
06/18
06/18
Target
China
125
$120
Actual
$300
China
exports
exports
to U.S.
to U.S.
U.S. & China
$331
impose
25%
U.S.
imposes
10% tariffs
tariffs on
on $16B of
$200B/
goods
China 5-10%
on $60B
$250
$199
$200
$173
U.S.
imposes
10% tariffs
on $200B/
China 510%
on $60B
China
imports
China
imports
from
U.S.
from U.S.
$100
$100
U.S. proposes
increase from 10%
to 25% on $200B
U.S. & China
U.S. proposes
impose
increase 25%
from
tariffs
10%
to 25%
on
on$16B
$200Bof
goods
12/18
06/19
03/19
$150
$50
U.S. proposes
tariffs
on $300B/
U.S.
proposes10%
10%
tariffs
on $300B/
China
on on
$75B
Chinaproposal
proposal
$75B
12/19
12/19
06/20
09/20
12/20
06/21
06/21
12/21
03/22
$0
2020
2021
Inflation
Consumer price index
Producer price index
Year-over-year change
Year-over-year change
20%
9%
7%
25%
Headline CPI
Core CPI
Food inflation (RHS)
Jun. 2022
2.5%
1.0%
2.9%
5%
20%
Jun. 2022
6.1%
7.5%
1.7%
Headline PPI
Producer goods
Consumer goods
15%
15%
10%
3%
10%
5%
1%
5%
0%
-1%
0%
-3%
-5%
-5%
-10%
'11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
-5%
-10%
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Central bank operations: Liquidity injections
Liquidity injections by the PBoC
RMB billions, net injection
2,400
2,000
Open market operations*
Monetary policy tools**
1,600
1,200
800
400
0
-400
-800
-1,200
'14
'15
'16
'17
'18
'19
'20
'21
'22
Central bank operations: policy rates
Key policy rates
Per annum
7.5%
Policy rate
Description
Jul. 31, 2022
New benchmark lending rate,
Loan prime rate
3.7%
ceiling of interest rate corridor
6.0%
Lending rate
(1-year)
Medium-term
lending facility
Most representative money
market tool
2.9%
Interbank repo
Interbank market rate
1.7%
Deposit rate
Floor of interest rate corridor
1.5%
4.5%
Loan prime rate
(1-year)*
Medium-term lending
facility (1-year)
3.0%
Interbank repo (7-day)
1.5%
Deposit rate (1-year)
0.0%
'15
'16
'17
'18
'19
'20
'21
'22
Central bank operations: reserve requirements
Reserve requirement ratio
22%
20%
Large banks
18%
Small and medium
sized banks
16%
14%
Jul. 2022:
11.25%
12%
10%
8%
Jul. 2022:
8.25%
6%
'09
'11
'13
'15
'17
'19
'21
Credit conditions
Credit cycles
Percentage points, credit growth – nominal GDP growth, 3-month moving average
25
Rapid rebound in CPI & PPI
20
Tightening:
125bps rate
hikes, BASEL III
adoption
Loosening:
216bps rate cuts,
4tn stimulus
15
Interbank
liquidity
crunch
10
Loosening:
56bps rate
cuts, trust
boom
5
Tightening:
shadow
banking
tightening
A-share
market crash
Tightening:
Implementation
of de-leveraging
policies
Loosening:
165bps rate
cuts, LGFV
debt swap**
Loosening:
RRR cuts
Policy
normalization
COVID-19
outbreak
Rate cut
Jun. 2022:
1.7ppts
0
Global
Financial
Crisis
U.S. – China
trade tensions
Wenzhou small and medium
enterprise (SME) crisis*
Loosening:
RRR and
LPR cuts
-5
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Credit impulse and commodity prices
Credit impulse and industrial metals’ prices
% of nominal GDP, year-over-year change
Year-over-year change, 3-month moving average
25%
100%
Bloomberg industrial metals index
20%
80%
15%
60%
10%
40%
5%
20%
0%
0%
-5%
-20%
-10%
-40%
Credit impulse
-15%
-60%
'05
'07
'09
'11
'13
'15
'17
'19
'21
Fiscal policy
Fiscal revenues and expenditures*
Pace of central and local government bond issuance
Year-over-year change, 3-month moving average
Year-to-date issuance as % of full-year quota
100%
40%
30%
Expenditures
90%
20%
10%
80%
0%
Quota
(RMB trillion)
2020
8.5
2021
7.2
Jun. 2022
7.0
% of quota
filled
98%
97%
67%
-10%
-20%
70%
Revenues
-30%
60%
-40%
'14
'15
'16
'17
'18
'19
'20
'21
'22
50%
Fiscal balance
% of nominal GDP
40%
0%
Budget deficit
-2%
30%
-4%
Actual deficit**
-6%
20%
-8%
-10%
Augmented deficit
-12%
10%
-14%
-16%
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
0%
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct Nov Dec
Yuan exchange rates
Chinese yuan exchange rates
Price levels
7.20
90
CFETS CNY Index*
Depreciating
92
7.00
94
6.80
96
6.60
98
100
6.40
102
6.20
Exchange rate
Description
USD/CNY
Chinese Yuan in onshore market vs. U.S. dollar
6.00
USD/CNY
USD/CNH
Chinese Yuan in offshore market vs. U.S. dollar
CFETS CNY
Index
China Foreign Exchange Trade System basket
of 24 currencies traded against the Chinese
Yuan
104
106
USD/CNH
5.80
108
'14
'15
'16
'17
'18
'19
'20
'21
'22
Yuan and FX reserves
USD/CNY and change in FX reserves
USD / CNY (inverted)
Change in monthly FX reserves
(USD billions)
Chinese currency in global perspective
Currency weights
weights in
in IMF’s
IMF’s SDR
SDR basket
basket
Currency
Global central
central bank
bank reserve
reserve manager
manager holdings
holdings
Global
100%
100%
% of
of total
total
%
90%
90%
80%
80%
Pound
Sterling
Pound Sterling
8%
7%
Japanese
Yen
Japanese Yen
8%
8%
Chinese
Yuan
Chinese Yuan
11%
12%
EUR
JPY
GBP
RMB
CAD
AUD
CHF
Other
100%
90%
80%
70%
70%
60%
60%
USD
70%
Euro
Euro
29%
31%
60%
50%
50%
50%
40%
40%
40%
30%
30%
30%
20%
20%
U.S.
Dollar
U.S. Dollar
43%
42%
10%
10%
20%
10%
0%
0%
0%
Currency
Currency weights
weights in
in SDR
SDR basket
basket
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Size of Chinese and global equity markets
Stock exchange market capitalizations
Trillions of U.S. dollars, 2021
$60
$52.2
$50
$40
$30
$20
$14.4
$10
$6.5
$5.4
Japan
Hong Kong
$3.8
$0
NYSE & Nasdaq
Shanghai & Shenzhen
London
Stock exchange market capitalizations
Trillions of U.S. dollars
$60
NYSE & Nasdaq
$50
Shanghai & Shenzhen
Hong Kong
$40
$30
$20
$10
$0
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
Types of and access to Chinese equities
Share class
Definition
Currency
Securities incorporated in Mainland China, listed on the
Shanghai or Shenzhen Stock Exchange
A-shares
Onshore
RMB
Securities incorporated in Mainland China, listed on the
USD (Shanghai), HKD
Shanghai or Shenzhen Stock Exchange
(Shenzhen)
Securities incorporated in Mainland China, listed on the Hong
HKD
Kong Stock Exchange
B-shares
H-shares
Securities of state-owned companies incorporated outside
Mainland China, listed on the Hong Kong Stock Exchange
HKD
P-chips
Securities of non-government owned companies incorporated
outside Mainland China, listed on Hong Kong Stock Exchange
HKD
Overseas
(N and S-shares)
Securities (including ADRs) listed on foreign exchanges such
as the Nasdaq and NYSE (N-shares), and Singapore
Exchange (S-shares)
Red-chips
Offshore
Foreign investor
access
Indices
QFII (CNY), RQFII
(CNH), Northbound
Stock Connect
SZSE Composite
Index, Shanghai
Composite Index, CSI
300, MSCI China A,
MSCI China
No restrictions
Hang Seng Index,
MSCI China
No restrictions
USD, SGD
MSCI China
Market capitalization and constituents by market
MSCI indices, as of Jul. 2022
$2,500
600
Market capitalization, billions of US$
$2,000
Number of constituents
495
500
$1,885
400
$1,500
300
$973
$1,000
200
$448
79
$500
A-shares
B-shares
H-shares
Red-chips
100
$190
$12033
$6 4
$0
80
24
P-chips
Overseas
0
Chinese initial public offerings
Initial public offerings
IPO breakdown by sector
Includes Shanghai, Shenzhen, Hong Kong, and ADRs
Share of current market value, 2016-2022 YTD
$180
Value (USD billions)
Deal count
536
$165
553
600
Sectors % of market value
Consumer
32.4%
Industrial
17.3%
Financials
17.3%
Comm.
12.7%
Tech
9.5%
Materials
4.7%
Energy
3.7%
Diversified
1.3%
Utilities
1.2%
550
150.7
502
$150
500
131.8
$135
450
$120
400
$105
$90
300
281
217
64.3
$75
$60
350
320
48.1
IPO breakdown by share type
71.3
218
54.7
52.0
250
200
$45
150
$30
100
$15
50
$0
0
2016
2017
2018
2019
2020
2021
2022
YTD
Share of current market value, 2016-2022 YTD
Hong Kong
36%
ADRs
8%
Shanghai &
Shenzhen
56%
Chinese stocks listed in the U.S.
Chinese stocks listed on U.S. exchanges
USD billion
Chinese stock performance by listing
Number
$3,000
350
Aggregate market cap
of ADRs
Price index, Jan. 2002 = 100, USD, monthly
900
Total number of ADRs
800
300
$2,500
700
S&P China Select ADR Index
250
600
$2,000
200
500
$1,500
150
$1,000
400
300
100
200
$500
Shanghai Shenzhen CSI 300 Index
50
100
$0
0
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Jul.
'22
0
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'22
Sector composition of offshore and onshore equities
Sector weights
% of index market capitalization
50%
MSCI China
40%
Hang Seng
CSI 300
S&P 500
38%
30%
30%
28%
22%
22%
20%
18%
15%
11%
10%
11%
9%
14%
14%
14%
11%
10%
9%
8%
6%
4%
2%
8%
8%
7% 6%
6%
3%
8%
7%
6%
4%
4%
4%
2%
3%
3%
2% 3% 3%
4%
4%
3% 3%
2%
2%
0%
Consumer Communication
Discretionary
Services
Financials
Health Care
Consumer
Staples
Information
Technology
Industrials
Materials
Real Estate
Utilities
Energy
State-owned enterprise representation in key stock indices
Hang Seng Composite Index (HSCI)
CSI 300 Index
SOE % of sector and % of overall index market capitalization
100% 98%
SOE % of sector and % of overall index market capitalization
100% 100% 100% 100%
92%
89%
85%
80%
80%
70%
70%
63%
60%
58%
60%
52%
48%
45%
43%
40%
40%
40%
38%
31%
23%
22%
20%
20%
7%
0%
4%
3%
0%
17%
Market structure of offshore vs. onshore equities
Average daily
daily turnover
turnover
Average
Participation by
by type
type of
of investor
investor
Participation
U.S. dollars,
dollars, billions,
billions, 2021
2021
U.S.
% of
of total
total trading
trading value,
value, latest*
latest*
%
Individual investors
investors
Individual
$450
$405.3
$400
Institutional investors
investors
Institutional
100%
100%
90%
90%
$350
80%
80%
$300
70%
70%
$250
60%
60%
$200
50%
50%
18%
18%
80%
80%
$166.6
40%
40%
$150
82%
82%
30%
30%
$100
20%
20%
$50
$17.6
10%
10%
20%
20%
$0
Hong Kong
Shanghai &
Shenzhen
U.S.
0%
0%
Shanghai
Shanghai
Hong Kong
Kong
Hong
Annual returns and intra-year declines
MSCI China intra-year declines vs. calendar year returns
Local currency, average intra-year drops of -30.0% (median: -25.2%) and annual returns positive in 15 of 29 years of an average of 5.5%
100%
80
79
80%
64
59
60%
40%
52
35
33
26
16
20%
YTD '22
21
19
10
3
0
5
%
-1
-1
-20%
-23
-40%
-16
-18
-20
-26
-26
-32
-31
-38
-25
-65
'95
'97
-9
-19
-20
-17
-22
-23
-38
-68
'99
'01
'03
'05
'07
'09
'11
'13
'15
'17
-20
-32
-33
-35
-52
-80%
'93
-10
-22
-37
-51
-53
-17
-17
-39
-44
-47
-20
-22
-22
-30
-34
-47
-60%
-11
-13
-15
'19
'21
Chinese equity market corrections and subsequent performance
Previous vs. current Chinese equity market corrections
MSCI China
50%
Peak-to-trough correction
4 weeks after trough
12 weeks after trough
26 weeks after trough
32%
30%
27%
26%
25%
19%
19%
13%
12%
8%
10%
22%
10%
-10%
-30%
-37%
-50%
-43%
Apr. '11 to
Sep '11
-33%
Jan. '18 to
Oct. '18
May '15 to
Feb. '16
-54%
Feb. '21 to
Mar. '22
-70%
2011 correction
2015/16 correction
2018 correction
2021/2022 correction
Reform cycle policy principles
MSCI China price index
180
Year(s)
160
140
120
Principle
2003
Macro economic control
2008
Economic stabilization
2010-2011
Property market control
Policy Tool
Sectors
Interest rate and RRR hike,
administrative power
Real estate, steel, auto, power plants, cement, glass and
other industries with excessive capacity and/or high
energy consumption. Cut export tariff return for high
energy-consuming and heavy-pollution products.
Infrastructure investment, interest rate
and RRR cuts, fiscal expansion
Credit control and purchase control in
property market
Highway, railway, airports, real estate
Real estate
2015-2018
Supply-side reform
Monetary policy, administrative power
Traditional sectors (property market, steel, coal, cement,
glass), local government financing
2021-2022
Limit monopoly power
Regulations, monetary policy
Internet, education, health care, real estate, energy
100
80
Introduction of
policy reforms
60
40
20
0
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Chinese equity market dispersion
Share type dispersion
Sector dispersion
Price index, USD terms, 100 = Jan. 2021
Price index, USD terms, 100 = Jan. 2021
130
160
MSCI China
Apparel & Luxury
Goods Index
120
140
110
MSCI China A
120
100
90
100
80
S&P China
Select ADR Index
Hang Seng Index
80
70
60
60
MSCI China
Semiconductor Index
Hang Seng
Tech Index
50
40
40
30
01/21
04/21
07/21
10/21
01/22
04/22
07/22
20
01/21
04/21
07/21
10/21
01/22
04/22
07/22
Chinese equities: Valuations
MSCI China: Forward P/E ratio
26x
24x
22x
20x
18x
Index
Valuation
m easure
Latest
Average
Std. dev. over/under-valued
Tim e
period
MSCI China
MSCI China
Forw ard P/E
10.9x
11.8x
-0.4
20-year
Price to book
1.4x
1.9x
-0.6
20-year
MSCI China
Dividend yield
2.6%
2.5%
-0.1
20-year
Hang Seng China Enterprises (H-shares)
Forw ard P/E
8.8x
10.3x
-0.4
15-year
CSI 300 (A-shares)
Forw ard P/E
13.4x
15.2x
-0.3
15-year
ChiNext
Forw ard P/E
35.6x
36.0x
0.0
10-year
SME Board
Forw ard P/E
20.0x
23.6x
-0.7
5-year
16x
+1 Std. dev.: 14.4x
14x
Average: 11.8x
12x
Jul. 2022:
10.9x
10x
-1 Std. dev.: 9.2x
8x
6x
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
'22
Chinese equities: Relative valuations vs. U.S. equities
MSCI China: Price-to-earnings relative to U.S.
MSCI China Tech: Price-to-earnings relative to U.S.
MSCI China vs. S&P 500 Indices, next 12 months
80%
MSCI China Technology vs. S&P 500 Technology subsectors, next 12 months
130%
60%
105%
+1 Std. dev.: 75%
80%
40%
55%
20%
Average: 31%
30%
+1 Std. dev.: -3%
0%
5%
Average: -22%
-20%
-1 Std. dev.: -12%
-20%
Jul. 2022:
-32%
-1 Std. dev: -41%
-40%
-45%
Jul. 2022:
-38%
-60%
-70%
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
'02
'04
'06
'08
'10
'12
'14
'16
'18
'20
China: Sector earnings and valuations
Earnings growth of MSCI China*
MSCI China price-to-earnings
Earnings per share, year-over-year change, consensus estimates
Forward P/E ratios
120%
70x
2022
2023
100%
60x
80%
50x
60%
40%
40x
20%
30x
0%
20x
-20%
Sector
Weight
(%)
3.7
21.7
2.3 100.0 14.2 34.8
4.2
6.1
4.4
5.7
10x
Cons. Discr.
Cons. Staples
Utilities
Health Care
Industrials
Tech.
Materials
MSCI China
Financials
Comm. Services
Real estate
Energy
-40%
1.2
0x
1.8
15-yr. range
15-yr. average
Latest
Onshore equities: Sector performance
Returns (%)
2019
2020
10-yr. ('11-'21) annualized
2017
2018
Con. staples
Utilities
31.2
-15.6
2021
2Q '22
YTD '2022
61.8
70.4
Utilities
Con. disc.
Energy
Con. staples
IT
IT
39.7
18.6
18.5
15.9
29.2
49.9
49.8
38.7
Financials
Financials
IT
Health Care
Energy
IT
Telecom
Health Care
IT
IT
17.1
-19.3
57.6
51.3
38.1
14.5
-5.2
13.5
28.4
44.5
39.0
26.7
Materials
Industrials
Materials
Health Care
Energy
38.8
30.3
9.7
-7.1
12.8
25.4
36.9
35.3
24.7
Con. disc.
Industrials
Energy
Industrials
All A-Share
Materials
Con. disc.
Telecom
Health Care
Con. staples Con. staples
Telecom Con. staples Health Care Industrials
8.0
Materials
-20.6
35.7
Health Care Financials
Con. staples Con. disc.
Return (%) Volatility (%)
Forward P/E
2020
2021
YTD '2022
Con. staples Con. staples
Con. staples Health Care
Con. disc.
6.9
-25.8
34.8
34.2
25.4
7.9
-8.4
10.2
25.1
33.8
30.8
23.9
Health Care
Energy
Telecom
Materials
Telecom
Materials
Utilities
Telecom
Health Care
Telecom
Con. disc.
Industrials
5.9
-27.0
34.6
30.2
8.4
5.6
-10.2
9.7
24.4
30.3
28.3
19.8
Energy
All A-Share
All A-Share
All A-Share
IT
Financials
Industrials
Industrials
Industrials
Utilities
3.7
-28.8
33.4
26.9
8.0
5.2
-10.9
9.4
24.1
28.9
26.0
18.0
All A-Share
Industrials
Con. disc.
IT
All A-Share
Utilities
All A-Share
Materials
Utilities
Telecom
3.7
-33.0
26.4
18.6
7.7
3.5
-12.1
9.2
23.5
22.7
23.9
16.0
Con. disc.
Telecom
Materials
Utilities
Con. disc.
IT
Financials
Con. disc.
Financials
Energy
All A-Share
All A-Share
2.1
-33.7
25.6
3.7
-3.1
-1.1
-13.1
8.6
23.0
20.1
17.3
13.9
IT
Con. disc.
Industrials
Financials
Telecom
Utilities
Con. disc.
All A-Share
Materials
Materials
-1.5
-34.0
18.8
3.2
-19.4
8.4
23.0
19.7
15.1
12.1
Utilities
Materials
Energy
Energy
Materials
All A-Share
Utilities
Energy
Energy
-6.2
-34.6
11.6
-5.6
-7.9
-2.1
-20.4
8.1
21.7
14.6
8.7
7.6
Industrials
IT
Utilities
Telecom
Financials
Telecom
IT
Energy
Utilities
Financials
Financials
Financials
-6.8
-34.8
6.9
-6.5
-7.9
-2.8
-27.3
-1.5
21.6
8.9
7.0
6.0
All A-Share Con. staples
Health Care Financials
-7.0
-1.3
Con. staples Health Care Health Care
Industrials Con. staples
China equities: Growth vs. value
Growth vs. value valuations*
Growth vs. value relative performance
MSCI China growth/value fwd. P/E ratio
MSCI China growth/value performance, Jan. 2006 = 100
7.0
400
Growth
expensive
relative to value
Growth outperforming value
350
6.0
300
5.0
250
+1 Std. dev.: 4.0
4.0
200
Average: 2.7
3.0
150
2.0
100
-1 Std. dev.: 1.5
1.0
50
Growth underperforming value
Growth cheap
relative to value
0.0
0
'06
'08
'10
'12
'14
'16
'18
'20
'22
'06
'08
'10
'12
'14
'16
'18
'20
'22
Chinese private equity markets
Number of unicorns by city*
Venture capital fundraising
Hurun Global Unicorn Index 2021, top 10 cities
Capital raised, % of global total
80%
San Francisco
U.S.: 66%
70%
151
60%
Beijing
91
50%
40%
New York
85
30%
20%
Shanghai
71
Shenzhen
32
London
31
Bengaluru
0%
'06
18
Berlin
17
0
20
'10
'12
'14
'16
'18
'20
Exit value (U.S. dollar, billions) and count
22
Paris
'08
China venture capital exits
28
Hangzhou
China: 7%
10%
40
$200
Chinese
unicorns
by sector
# of
Unicorns
E-commerce
42
9%
Health Tech
30
5%
Artificial
Intelligence
30
5%
SaaS
18
4%
Semiconductor
18
3%
60
80
% of total
valuation
Exit value ($B)
Exit count
219
120
140
250
$152
$150
170
$100
100
300
275
121
58
$50
31
15
160
$0
$2
14
$9
$1
22
$4
48
$14 $17
42
49
$2
$7
120
$115
200
179
150
$65
100
$55
$35
118
$17 $18
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
50
0
MSCI Emerging Markets Index: Inclusion of China A-Shares
MSCI Emerging Markets Index: Inclusion of China A-Shares
EMEA
15%
EMEA 12%
Latin
America
25%
Taiwan
14%
Korea
13%
P-chips 8%
Asia ex-China,
Korea & Taiwan
16%
Red-chips H-shares
9%
5%
Taiwan
11%
Korea
12%
EMEA
13%
Latin
America
12%
Taiwan
15%
Asia ex-China,
Korea & Taiwan
18%
Foreign
H-shares
listed
10%
8%
P-chips
8% Red-chips
4%
A-shares
2%
Latin
America
8%
Asia ex-China,
Korea & Taiwan
20%
Korea
12%
Foreign
listed
3%
P-chips
15%
A-shares
5%
H-shares
7%
Red-chips
2%
August 2011
China: 17%
Pre A-Share Inclusion
May 2019
China: 32%
A-Share inclusion begins
July 2022
China: 32%
20% A-Share inclusion
(Current)
Onshore equities: Market opening
Foreign investors’ holdings of onshore Chinese equities
RMB trillions
China’s weight in selected indicators
4.5
55%
Total as of % of
domestic market cap
Foreign investor holdings
5.0%
% of total
50%
49%
50%
4.5%
4.0
45%
A-shares*
45%
Offshore
4.0%
3.5
40%
3.5%
3.0
3.0%
35%
32%
30%
23%
5%
2.5
2.5%
2.0
25%
20%
18%
2.0%
15%
1.5
13%
27%
1.5%
22%
10%
6%
1.0
1.0%
0.5
0.5%
0.0
0.0%
'14
'15
'16
'17
'18
'19
'20
'21
4%
5%
1%
3%
0%
EM
GDP
EM
market
cap
MSCI
EM
(current)
MSCI
Global
EM
GDP
(100%
A-share
inclusion)
Global
market
cap
MSCI
ACWI
(current)
3%
3%
MSCI
ACWI
(100%
A-share
inclusion)
Onshore equities and global portfolios
Correlation between
between A-shares
A-shares and
and global
global equities
equities
Correlation
S&P 500
S&P 500
S&P 500
S&P 500
MSCI
MSCI
ACWI
ACWI
MSCI EM
MSCI EM
MSCI
MSCI
EAFE
EAFE
MSCI
MSCI
China
China
Efficient frontier
frontier
Efficient
CSI 300
CSI 300
MSCI All
All Country
Country World
World and
and China
China A-shares
A-shares
MSCI
5.6%
1.00
1.00
85.0% AC World
+ 15.0% China A
5.5%
87.5% AC World
+ 12.5% China A
0.97
0.98
1.00
1.00
MSCIEM
EM
MSCI
0.77
0.77
0.83
0.83
MSCI EAFE
EAFE
MSCI
0.89
0.89
0.94
0.94
5.4%
Annualized return
MSCI
MSCI ACWI
ACWI
1.00
1.00
0.87
1.00
1.00
90.0% AC World
+ 10.0% China A
5.3%
92.5% AC World
+ 7.5% China A
5.2%
95.0% AC World
+ 5.0% China A
5.1%
MSCI China
China
MSCI
0.57
0.59
0.64
0.67
0.85
0.87
0.67
0.69
1.00
1.00
5.0%
97.5% AC World
+ 2.5% China A
99% AC World
+ 1% China A
100% AC World
(0.6% China A)
CSI
300
CSI
300
0.40
0.41
0.44
0.45
0.56
0.56
0.42
0.43
0.70
0.68
1.00
1.00
4.9%
15.7%
15.8%
15.9%
Volatility
16.0%
16.1%
Global investor positioning in Chinese assets
China net foreign portfolio investment
% of investors with no China A-share exposure
USD billions, 6-month moving average, latest available
80%
$35
73%
70%
Equity flows
$25
60%
$15
50%
Bond flows
40%
$5
30%
30%
-$5
20%
10%
-$15
0%
-$25
'14
'15
'16
'17
'18
'19
'20
'21
All Country World benchmark
investors
Emerging Markets benchmark
investors
Global revenue exposure to China
MSCI China
MSCI Emerging Markets
Other
23%
Europe
3%
China
88%
Japan
2%
Asia ex-China
4%
Asia ex-China
& Japan
23%
Other
3%
S&P 500
Japan
3%
Other
22%
U.S.
17%
Europe
22%
Asia ex-China
& Japan
13%
Asia ex-China & Japan
5%
China
16%
Japan
9%
China
36%
Europe
7%
U.S.
3%
MSCI All Country World excluding U.S.
U.S.
9%
Europe
14%
China
7%
Other
11%
U.S.
60%
Debt and bond markets by country
Bond market size in value and as a % of GDP
USD trillions, % of nominal 2021 GDP, as of 2Q22
$50
$40
300%
259%
Bond market outstanding*
Bond market % of GDP
$35.8
225%
156%
$30
$20.7
118%
150%
110%
$20
$11.5
75%
$10
$2.0
$0
0%
U.S.
China
Japan
Korea
Debt and bonds as a % of GDP
Total market value of total debt and bonds*, % of nominal 2021 GDP
500%
420%
Government
Corporate
Household
400%
293%
300%
287%
259%
281%
267%
205%
179%
200%
156%
118%
180%
203%
176%
136%
110%
76%
100%
0%
Debt
Bonds
Japan*
Debt
Bonds
UK
Debt
Bonds
China
Debt
Bonds
U.S.
Debt
Bonds
Korea
Debt
Bonds
Germany
Debt
Bonds
Brazil
Debt
Bonds
India
Bond market and yields by country
Debt by country
Yields by country
% GDP, includes government and corporate debt
Government and corporate bond indices
10%
400%
350%
8%
Japan
300%
6%
Mexico
250%
China
200%
4%
UK
China
U.S.
150%
U.S.
Korea
Germany
100%
Korea
2%
UK
Mexico
0%
Japan
50%
Germany
-2%
0%
'08
'10
'12
'14
'16
'18
'20
'08
'10
'12
'14
'16
'18
'20
'22
Credit ratings by country
Evolution of China's sovereign rating and selected 10-year government bond yields, local currency
10-year bond yield，
Jul. 2022
S&P Rating
AAA
Germany
0.85
AA+
U.S.
2.64
Korea
3.13
UK
1.89
Japan
0.18
China
2.77
Spain
1.98
BBB+
Mexico
8.59
BBB
Italy
3.08
BBB-
India
7.32
AA
AAA+
A
A-
12/92
05/96
07/99
02/04
07/05
07/06
07/08
12/10
09/17
Bond market in China
China's three different bond markets
China's onshore bond market by type of issuer
As of July 2022
USD trillions, as of June 30, 2022
$3.0
$2.6
Counted as
government debt,
officially
$2.5
Onshore RMB
(CNY) market*
Value: USD$7.7 trillion (the largest)
Average credit rating: A+
Average yield-to-maturity: 2.67%
$2.2
$2.0
$1.9
$1.5
Offshore
foreign
currency
market**
Offshore
RMB (CNH)
market***
Value: USD$464 billion (the middle)
Average credit rating: AAverage yield-to-maturity: 7.28%
Value: USD$25 billion (the smallest)
Average credit rating: A+
Average yield-to-maturity: 3.49%
$1.0
$0.4
$0.5
$0.2
$0.1
$0.0
$0.0
Central
Gov.
Policy
Bank
Regional Other Gov. Finance Industrials
Gov.
Related
Utility
Onshore government bond yields
Onshore government bond yields
Onshore government yield curve
% per annum
% per annum
5.0%
4.0%
4.5%
3.5%
12/31/2019
4.0%
12/31/2020
10-year
3.0%
07/29/2022
3.5%
3.0%
2.5%
5-year
2.5%
12/31/2021
2.0%
2.0%
1-year
1.5%
1.5%
1.0%
1.0%
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
3M
6M
1Y
3Y
5Y
7Y
10Y
20Y
30Y
Onshore corporate credit
Credit spread of onshore corporate bonds
Market structure of outstanding credit*
Basis points
B and below
0.2 trillion yuan
0.3%
1,000
AAA
AA
A
900
AAA- to AAA+
26 trillion yuan
44%
800
Unrated
26 trillion yuan
45%
700
600
A- to AA+
6 trillion yuan
10%
500
Value of defaults in onshore market
400
RMB billion
250
300
State owned enterprises (SOE)
200
Privately owned enterprises (POE)
200
150
100
19.1
33.4
131.5
117.6
112.5
51.7
100
0
50
1.3
5.8
7.1
0
-100
'15
'16
'17
'18
'19
'20
'21
'22
2014
2015
6.7
19.8
20.3
33.7
2016
2017
91.2
113.7
1.9
40.0
2018
2019
2020
2021
YTD
Chinese offshore credit spreads and bond market returns
Chinese offshore corporate credit spreads
Basis points, daily
3,000
350
High yield
Investment grade
2,500
300
2,000
5 yr. avg.
Jul. 31,
2022
HY
855
2,120
IG
160
190
250
2017
2018
2019
2020
2021
YTD
2017-2021
Ann.
Global
Bonds
7.4%
China Agg
3.5%
China Real
Estate HY
14.9%
China Agg
9.8%
China Govt.
8.7%
China Agg
-3.0%
China Agg
6.2%
China Real
Estate HY
7.1%
China Govt.
3.0%
China HY
12.7%
China Govt.
9.3%
China Agg
8.4%
China Govt.
-3.2%
China Govt.
5.8%
China HY
6.5%
China IG
0.5%
Asian Bonds
11.3%
Global
Bonds
9.2%
China IG
-0.1%
China IG
-8.5%
China IG
4.3%
1,500
200
China Agg
6.2%
Asian Bonds
-0.8%
China IG
10.2%
China Real
Estate HY
8.7%
1,000
150
Asian Bonds
5.8%
Global
Bonds
-1.2%
Global
Bonds
6.8%
China HY
7.5%
Global
Bonds
-4.7%
Global
Bonds
-12.1%
Global
Bonds
3.5%
100
China Govt.
5.0%
China Real
Estate HY
-3.1%
China Agg
3.4%
China IG
6.6%
China HY
-26.3%
China HY
-33.7%
China HY
-0.8%
50
China IG
4.4%
China HY
-4.2%
China Real
Estate HY
-37.2%
China Real
Estate HY
-53.1%
China Real
Estate HY
-1.9%
500
0
'17
'18
'19
'20
'21
'22
China Govt. Asian Bonds
2.8%
6.3%
Asian Bonds Asian Bonds Asian Bonds
-2.4%
-10.5%
4.0%
Taiwan
15%
America
11%
Asia exChina, Korea
& Taiwan
17%
Taiwan
12%
Asia exChina, Korea
& Taiwan
18%
Korea
12%
A-shares
Foreign
H-shares
2%
listed
10%
8% P-chips
8%
Red-chips
Weight
of China
in bond universe
4%
Korea
12%
Bond index weightings to China
Foreign
listed
9%
and bond
As of Jul. 2022
May 2019
China: 32%
100%
5%
6%
P-chips
indices
8%
H-shares
8%
America
7%
14%
Asia exChina, Korea
& Taiwan
17%
Korea
12%
Foreign
listed
6%
A-shares
4%
P-chips
17%
Red-chips
4%
November 2019
China: 34%
H-shares
6%
December 2021
China: 35%
A-shares
5%
Red-chips
2%
90% universe and bond indices
of China in bond
5%
29%
6%
80%
36%
36% 70%
38%
32%
38%
26%
25%
25%
30%
50%
31%
25%
1%
18% 40%
14%
25%
29%
30%
Global bond universe
20%
30%
27%
33%
10%
7%
4%
1%
Local EMD sovereigns30%
36%
USD EMD corporates
USD EMD sovereigns
18%
3%
14%33%
8%
Global aggregate
18%
18%
14%
10%
14%
8%
10%
Global aggregate
Local EMD sovereigns
7%
5%
USD EMD corporates
USD EMD sovereigns
0%
Global bond universe
Other
U.S.
50%
60%
3%
48%
35%
37%
Europe,
Middle East
& Africa
Latin
America
Asia exChina
China
Returns and volatility of Chinese bonds
Return and volatility of government bonds
Return of Chinese bonds versus Asia benchmarks
Annualized total return and volatility, Aug. 2012 – Jul. 2022
5.0%
Annualized total return, Aug. 2017 – Jul. 2022
Annualized return
6.0%
4.6%
Annualized volatility
4.5%
5.0%
5.0%
4.0%
4.7%
3.9%
4.0%
4.0%
3.4%
3.5%
3.0%
China
Asia benchmark
2.8%
3.0%
2.5%
1.9%
2.0%
2.0%
1.5%
1.0%
0.6%
1.1%
1.0%
0.0%
0.0%
0.5%
-0.5%
0.0%
-1.0%
Chinese Central
Gov. Bonds (CNY)
Chinese Central
Gov. Bonds (USD)
U.S. Treasuries
Corporate Credit
(USD)
Corporate Credit
(Local ccy)
Government Debt
(Local ccy)
Diversification benefits of Chinese bonds
Correlation between Chinese and global government bonds
Total return index in U.S. dollars*, 12-month rolling correlations of monthly return
1.00
0.80
0.60
Average: 0.32
0.40
0.20
0.00
-0.20
China
India
South Africa
Mexico
U.S.
UK
Italy
Japan
Germany
-0.40
-0.60
-0.80
15-year correlation
to Global Aggregate
Treasuries
0.24
0.24
0.33
0.37
0.47
0.45
0.49
0.60
0.64
-1.00
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
'18
'19
'20
'21
Appendix: Key facts about China
Basics
Official name: People’s Republic of China (PRC)
Formation: c. 2070 B.C. (first pre-imperial dynasty)
Founding of the State: 1949
Demographics
Population: 1.4 billion (2020)
56 ethnic groups, with the majority of the population (92%) being Han
Official language: Mandarin
Median age: 38.4 (2020)
Geography
Capital: Beijing
Largest cities by population: Shanghai, Beijing, Tianjin, Guangzhou,
Shenzhen, Wuhan
Land area: 9.7 million sq. km or 3.7 million sq. mi
Economy
Type: Socialist market economy
Nominal GDP: US$14.72 trillion (2020)
Nominal GDP per capita: $10,500 (2020)
Gini coefficient: 0.47 (2019)
Government
Ruling party: Chinese Communist Party (CCP)
General Secretary of CCP, President of PRC: Xi Jinping
Premier of PRC: Li Keqiang
Legislative body: National People’s Congress (NPC)
The General Secretary of the CCP is elected by the Party Congress every 5
years. The President of PRC and the Premier of PRC are elected by the
NPC every 5 years. The Premier has a two term limit while the President of
the PRC and the General Secretary of the CCP have no term limit.
Central Bank
The central bank is the People’s Bank of China (PBOC)
Target/goal: Maintain stability of the value of the currency and promote
economic growth through tools such as open market operations, reserve
requirement ratios, interest rates and lending facilities to banks
Policy: Mix of quantity and price control
Currency
Renminbi (RMB) or Chinese Yuan (¥) is the official currency
In foreign exchange markets:
CNY is the onshore RMB traded within China, managed by the PBOC
CNH is the offshore currency traded outside of China at a free-floating rate
Equity markets
Size: $12.4 trillion (2021)
The onshore market is comprised of Chinese companies listed in
Shanghai and Shenzhen stock exchanges
The offshore market is comprised of Chinese companies listed in the Hong
Kong Stock Exchange and overseas
Fixed income markets
Size: $13.0 trillion (2021)
Onshore bonds are listed in Mainland Chinese exchanges and
denominated in CNY
Offshore bonds or “dim sum bonds” are primarily traded in Hong Kong
and denominated in CNH
Offshore foreign currency bonds are traded in Hong
Kong dollars, U.S. dollars or euros.
J.P. Morgan Asset Management: Index Definitions
All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include
fees or expenses.
Equities:
The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. The index includes a
representative sample of 500 leading companies in leading industries of the U.S. economy. The S&P 500 Index
focuses on the large-cap segment of the market; however, since it includes a significant portion of the total value of the
market, it also represents the market.
The MSCI® EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United
States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed
markets outside of North America.
The MSCI Europe IndexSM is a free float-adjusted market capitalization index that is designed to measure developed
market equity performance in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed
market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is
designed to measure the equity market performance of developed and emerging markets. As of June 2009 the MSCI
ACWI consisted of 45 country indices comprising 23 developed and 22 emerging market country indices.
The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM)
countries (excluding the US) and 27 Emerging Markets (EM) countries*. With 2,357 constituents, the index covers
approximately 85% of the global equity opportunity set outside the US.
The MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure
equity market performance in the global emerging markets. As of June 2007, the MSCI Emerging Markets Index
consisted of the following 25 emerging market indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic,
Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines,
Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
The MSCI China IndexSM captures large and mid cap representation across China H shares, B shares, Red chips and
P chips. With 148 constituents, the index covers about 84% of this China equity universe. The MSCI China Index was
launched on December 31, 1992.
The MSCI China A Index captures large and mid-cap representation across China securities listed on the Shanghai
and Shenzhen exchanges. The index covers only those securities that are accessible through "Stock Connect". The
index is designed for international investors and is calculated using China A Stock Connect listings based on the
offshore RMB exchange rate (CNH).
The MSCI China Growth Index captures large and mid cap securities exhibiting overall growth style characteristics
across the Chinese equity markets. The growth investment style characteristics for index construction are defined using
five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate and
long-term historical EPS growth trend and long-term historical sales per share growth trend.
The MSCI China Value Index captures large and mid-cap Chinese securities exhibiting overall value style
characteristics. The value investment style characteristics for index construction are defined using three variables: book
value to price, 12-month forward earnings to price and dividend yield.
The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price
performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The index was developed on
December 19, 1990 with a base value of 100.
The China Shenzhen Composite Index is an actual market-cap weighted index that tracks the stock performance of
all the A-share and B-share lists on Shenzhen Stock Exchange. The index was developed on April 3, 1991 with a base
price of 100.
The Hang Seng Index (“HSI”) is the most widely quoted gauge of the Hong Kong stock market. It includes the
largest and most liquid stocks listed on the Main Board of the Stock Exchange of Hong Kong. Stocks are free-floatadjusted for investability representation, and a 10% capping is applied to avoid single stock domination. The index
was developed on November 24, 1969 with a base price of 100.
The Shanghai Shenzhen CSI 300 Index (“CSI Index”) is a free-float weighted index that consists of 300 A-share
stocks listed on the Shanghai or Shenzhen Stock Exchanges. The Index has been calculated since April 8, 2005,
with a base level of 1000 on 12/31/2004.
The SZSE Composite Index is a stock market index of Shenzhen Stock Exchange. It includes all companies listed
on the exchange.
The Hang Seng China Enterprises Index ("HSCEI") serves as a benchmark that reflects the overall performance of
Mainland securities listed in Hong Kong. The index comprises the largest and most liquid Mainland securities listed in
Hong Kong. Stocks are free float-adjusted for investibility representation, with a 10% capping to avoid single stock
domination. The index was launched on August 8, 1994.
The SME Index comprises the 100 largest and most liquid A-share stocks listed and trading on the SME Board
Market. The index aims to reflect the performance of the Small and Medium Enterprise (SME) Board level. The index
is free-floating, with a base date of May 31, 2010.
The ChiNext Index comprises the 100 largest and most liquid A-share stocks listed and trading on the ChiNext
Market of the Shenzhen Stock Exchange. The index aims to reflect the performance of ChiNext Market level. The
index free-float capitalization-weighted . The index has a base value of 1000 on May 31, 2010.
Fixed income:
The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four
local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and
securitized fixed-rate bonds from both developed and emerging markets issuers.
The J.P. Morgan Corporate Emerging Markets Bond Index (CEMBI): The CEMBI tracks total returns of US dollardenominated debt instruments issued by corporate entities in Emerging Markets countries, and consists of an
investable universe of corporate bonds.
The J.P. Morgan GBI EM Global Diversified tracks the performance of local currency debt issued by emerging
market governments, whose debt is accessible by most of the international investor base.
The J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI Global Diversified) tracks total
returns for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign
entities: Brady bonds, loans, Eurobonds. The index limits the exposure of some of the larger countries.
The FTSE Chinese (Onshore CNY) Broad Bond Index measures the performance of a subset of bonds from the
FTSE Chinese (Onshore CNY) Broad Bond Index (CNYBBI) which tracks onshore Chinese yuan-denominated fixedrate governments, agencies, and corporations debt issued in mainland China. The index includes bonds that are
traded on the China Interbank Bond Market (CIBM).
The J.P. Morgan Asia Credit Index Core (JACI Core) consists of liquid US-dollar denominated debt instruments
issued out of Asia ex-Japan. The JACI Core is based on the composition and established methodology of the J.P.
Morgan Asia Credit Index (JACI), which is market capitalization weighted. JACI Core includes the most liquid bonds
from the JACI by requiring a minimum $350 million in notional outstanding and a minimum remaining maturity of 2
years. JACI Core also implements a country diversification methodology. Historical returns and statistics for the JACI
Core are available from December 30, 2005.
J.P. Morgan Asset Management: Index Definitions
Fixed income cont.:
The J.P. Morgan Asia Diversified (JADE) Indices track local currency government bonds issued by
countries within the Asia region (excluding Japan). The two main composite series are the JADE Broad and
the JADE Global which provide Diversified exposure to the countries within the region. The JADE Global
excludes countries with capital controls and those not accessible by foreign investors. Launched in March
2016, the JADE Broad/Global indices have daily historical index levels and statistics starting from Dec 31,
2004.
The Bloomberg Global Aggregate - Corporate Index is a flagship measure of global investment grade,
fixed-rate corporate debt. This multi-currency benchmark includes bonds from developed and emerging
markets issuers within the industrial, utility and financial sectors.
The Bloomberg Global Treasury Index tracks fixed-rate, local currency government debt of investment
grade countries, including both developed and emerging markets. The index represents the treasury sector of
the Global Aggregate Index and contains issues from 37 countries denominated in 24 currencies.
The CSI Corporate Bond Index selects eligible corporate bonds listed at Shanghai Stock Exchange and
Shenzhen Stock Exchange, with remaining term to final maturity over 1 year. The index was launched on
June 9, 2003 and is based at 100 to Dec 31, 2002.
Other asset classes:
The Bloomberg Industrial Metals Subindex is composed of futures contracts on aluminum, copper, nickel and
zinc. It reflects the return of underlying commodity futures price movements only. It is quoted in USD.
Definitions:
Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings. Price to
book value compares a stock's market value to its book value. Price to cash flow is a measure of the market's
expectations of a firm's future financial health. Price to dividends is the ratio of the price of a share on a stock
exchange to the dividends per share paid in the previous year, used as a measure of a company's potential as an
investment.
Bonds are subject to interest rate risks. Bond prices generally fall when interest rates rise.
The price of equity securities may rise, or fall because of changes in the broad market or changes in a
company’s financial condition, sometimes rapidly or unpredictably. These price movements may result from
factors affecting individual companies, sectors or industries, or the securities market as a whole, such as
changes in economic or political conditions. Equity securities are subject to “stock market risk” meaning that
stock prices in general may decline over short or extended periods of time.
Real estate investments may be subject to a higher degree of market risk because of concentration in a specific
industry, sector or geographical sector. Real estate investments may be subject to risks including, but not limited
to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of
the underlying property owned by the trust and defaults by borrower.
International investing involves a greater degree of risk and increased volatility. Changes in currency exchange
rates and differences in accounting and taxation policies can raise or lower returns. Also, some markets may not
be as politically and economically stable as other nations. Investments in emerging markets can be more
volatile. The normal risks of international investing are heightened when investing in emerging markets. In
addition, the small size of securities markets and the low trading volume may lead to a lack of liquidity, which
leads to increased volatility. Also, emerging markets may not provide adequate legal protection for private or
foreign investment or private property.
Investments in commodities may have greater volatility than investments in traditional securities, particularly if
the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by
changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a
particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and
international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives
creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.
Derivatives may be riskier than other types of investments because they may be more sensitive to changes in
economic or market conditions than other types of investments and could result in losses that significantly exceed
the original investment. The use of derivatives may not be successful, resulting in investment losses, and the cost
of such strategies may reduce investment returns.
There is no guarantee that the use of long and short positions will succeed in limiting an investor's exposure to
domestic stock market movements, capitalization, sector swings or other risk factors. Investing using long and
short selling strategies may have higher portfolio turnover rates. Short selling involves certain risks, including
additional costs associated with covering short positions and a possibility of unlimited loss on certain short sale
positions.
Forecasts, projections and other forward looking statements are based upon current beliefs and
expectations. They are for illustrative purposes only and serve as an indication of what may occur. Given the
inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events,
results or performance may differ materially from those reflected or contemplated. Positive yield does not imply
positive return.
J.P. Morgan Asset Management (JPMAM) Global Market Insights Strategy Team as of 04/30/21. There can be
no assurance that the professionals currently employed by JPMAM will continue to be employed by JPMAM or
that the past performance or success of any such professional serves as an indicator of such professional's
future performance or success.
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Copyright 2022 JPMorgan Chase & Co. All rights reserved
Prepared by: David Kelly, Marcella Chow, Gabriela Santos, Chaoping Zhu, Adrian Tong, Olivia Schubert and Jennifer Qiu.
Unless otherwise stated, all data are as of July 31, 2022 or most recently available.
Guide to China
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