Emerging Markets & China Strategy

November 17, 2021

China’s policy reflation may have reached an inflection point, marked by the authorities intensifying easing efforts, particularly within the depressed housing sector. This significantly reduces the risk of a systemic failure in the real estate market. The financial stress among developers has likely peaked.

Meanwhile, this week’s Biden–Xi virtual summit is an important opportunity for the two leaders to clarify their respective agendas in the bilateral relationship, thus avoiding an escalation of tensions. We expect both sides will be open to continued engagement, and that bilateral ties, especially on economic issues, will improve.

For Chinese stocks, the reduced risk of a hard landing in the real estate sector, evidence of an acceleration in reflationary efforts, and a mini-cycle improvement in U.S.–China trade tensions provide a catalyst for this asset class to rally.