Guide to China 3Q 2021 | As of July 31, 2021 - MARKET INSIGHTS - J.P. Morgan Asset Management
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MARKET INSIGHTS Guide to China 3Q 2021 | As of July 31, 2021
Global Market Insights Strategy Team GTC | 2
Dr. David Kelly, CFA
New York
Dr. Cecelia Mundt Karen Ward
London Tilmann Galler, CFA Tai Hui
New York Chaoping Zhu, CFA
Frankfurt Hong Kong
Shanghai
David Lebovitz
New York Michael Bell, CFA
Meera Pandit, CFA Maria Paola Toschi Marcella Chow
New York London
Milan Hong Kong
Shogo Maekawa
Tokyo
Gabriela Santos
New York
Hugh Gimber, CFA
Jordan Jackson London Ian Hui Agnes Lin
New York
Vincent Juvyns Hong Kong Taipei
Luxembourg
Jack Manley
New York
Ambrose Crofton, CFA
Stephanie Aliaga London Dr. Jasslyn Yeo, CFA
New York Singapore
Manuel Arroyo Ozores, CFA
Madrid
Kerry Craig, CFA
Nimish Vyas Melbourne
New York Jai Malhi, CFA
London
Olivia Schubert
New York
Lucia Gutierrez Mellado
Max McKechnie Madrid
LondonPage reference GTC | 3
Long-term growth drivers Monetary, fiscal and FX policy Fixed Income
4. Evolution of China’s economy 34. Money supply 65. Debt and bond markets by country
5. Growth of the middle class 35. Central bank operations: Liquidity injections 66. Bond market and yields by country
6. Long-term growth potential 36. Central bank operations: Policy rates 67. Credit ratings by country
7. Change in growth structure 37. Central bank operations: Reserve requirements 68. Bond market in China
8. Contribution to GDP growth 38. Credit conditions 69. Onshore government bond yields
9. Importance of trade to China 39. Credit impulse and commodity prices 70. Onshore corporate credit
10. Importance of Chinese trade to the world 40. Total credit 71. Bond index weightings to China
11. Chinese consumer 41. Fiscal policy 72. Returns and volatility of Chinese bonds
12. Household savings 42. Yuan exchange rates 73. Diversification benefits of Chinese bonds
13. Demographic trends 43. Yuan trading band
14. Employment and human capital 44. Yuan and FX reserves APPENDIX: KEY FACTS ABOUT CHINA
15. Technological progress 45. Chinese currency in global perspective
16. Chinese private equity markets
17. Emission targets and energy mix Equities
18. Five-Year Plans 46. Size of Chinese and global equity markets
47. Types of and access to Chinese equities
Cyclical indicators 48. Chinese initial public offerings
19. Covid 19: Fatalities and vaccinations 49. Chinese stocks listed in the U.S.
20. Purchasing Managers’ Index 50. Sector composition of offshore and onshore equities
21. Keqiang index 51. State-owned enterprise representation in key stock indices
22. Fixed asset investment 52. Market structure of offshore vs. onshore equities
23. Industrial cycle 53. Annual returns and intra-year declines
24. Consumption 54. Chinese equities: Valuations
25. Chinese consumer sentiment 55. Chinese equities: Relative valuations vs. U.S. equities
26. Measures of unemployment 56. China: Sector earnings and valuations
27. China e-commerce 57. Onshore equities: Sector performance
28. China new energy vehicles 58. China equities: Growth vs. value
29. China’s housing market 59. Chinese technology regulation
30. Foreign trade 60. Inclusion of China A-shares in MSCI Emerging Markets
31. China/U.S. trade relationship 61. Onshore equities: Market opening
32. China-U.S. economic relations 62. Onshore equities and global portfolios
33. Inflation 63. Global investor positioning in Chinese assets
64. Global revenue exposure to China
3Evolution of China’s economy GTC | 4
GDP size of China and U.S. Real GDP per capita and urbanization ratios
growth drivers
GDP size, billions, current prices, U.S. dollars Constant prices, U.S. dollars, 1960 – 2030**
Long-term
Forecast* $70,000
$35,000
China 2030
China
contribution
GDP
to global
ranking
Decade growth
$60,000
$30,000 1980s 8 1%
1990s 8 21% 2020
2000s 5 15%
$50,000
$25,000 2010s 2 32%
2020s 2 28%
Real GDP per Capita
2030 1 31%
$40,000
$20,000 U.S.
U.S. $30,000
$15,000
$20,000 2030
$10,000 South
Korea
2020
China $10,000
$5,000 China
India
$0
15 35 55 75 95
$0
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '22 '25 '28 Urbanization Ratio
Source: J.P. Morgan Asset Management; (Left) BEA, National Bureau of Statistics of China; (Right) World Bank, United Nations.
*2021-2022 are a J.P. Morgan Asset Management estimate. 2023-2030 forecasts are based on the J.P. Morgan 2021 Long-term Capital Market Assumptions
(LTCMA) estimates. 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.
**Includes forecasts for 2025 and 2030 based on the 2021 LTCMAs, the United Nations population projections and the United Nations World Urbanization Prospects:
2018 Revision.
4 Guide to China. Data are as of July 31, 2021.The emergence of the middle class GTC | 5
Growth of the middle class Regional contribution middle class growth: 2020 to 2030
growth drivers
% of total population Millions of people
Long-term
100% 1,800
1995 2020F 2030F 32 10 -3
1,600 57
80
79% 79%
80% Rest of
1,400 Asia, 133
72% 73%
1,200
61% China,
60% 453
55% 1,000
800
41% 41%
40%
40%
600
30% 30%
India,
400 883
21%
20%
200
4%
0
1% 0% Asia Pacific Sub-Saharan Middle East Central and North America Europe
0% Africa and North South
India Indonesia China Brazil Mexico Africa America
Source: Brookings Institute, J.P. Morgan Asset Management.
Estimates for regional contribution are from Kharas, Homi. The Unprecedented Expansion of the Global Middle Class, An Update. Brookings Institution, 2017.
Middle class is defined as households with per capita incomes between $11 and $110 per person per day in 2011 PPP terms. 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.
Guide to China. Data are as of July 31, 2021.
5Long-term growth potential GTC | 6
Contribution to potential growth
growth drivers
Potential
Percentage points, real growth rate TFP Labor Capital
Long-term
Growth
15%
2000-2007 4.1 1.6 4.4 10.2
Capital
2008-2015 2.4 1.7 4.8 9.0
13% Labor
2016-2020 2.6 0.7 3.4 6.8
TFP
2021-2025 2.7 0.3 2.4 5.4
11% Actual GDP Growth 2026-2030 2.7 0.0 1.8 4.5
9%
7%
5%
3%
1%
-1%
'90 '95 '00 '05 '10 '15 '20 '25 '30
Source: CEIC, J.P. Morgan Global Economic Research, J.P. Morgan Asset Management.
TFP refers to total factor productivity and includes education. 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.
Guide to China. Data are as of July 31, 2021.
6Change in growth structure GTC | 7
Share of GDP by sector
growth drivers
% of nominal GDP
Long-term
60% 2020:
54.5%
Agriculture Manufacturing Services
50%
2020:
37.8%
40%
30%
20%
2020:
10% 7.7%
0%
'78 '83 '88 '93 '98 '03 '08 '13 '18
Source: CEIC, National Bureau of Statistics, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
Structure of Chinese GDP
7Contribution to GDP growth GTC | 8
Contribution to real GDP growth
growth drivers
Year-over-year change
Long-term
20% Gross capital formation (investment)
Consumption
Net exports
16% GDP
1H2021:
12.6%
12%
8%
4%
0%
-4%
-8%
'78 '83 '88 '93 '98 '03 '08 '13 '18
Source: CEIC, National Bureau of Statistics, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
8Importance of trade to China GTC | 9
Total exports and imports China’s exports by product
growth drivers
% of GDP Share of total exports
Long-term
40%
50%
35% Textiles and Clothing Machinery/Electronics
30% Exports Metals Chemicals
45%
2020: Transportation
25%
18%
20% 40%
15%
Imports
10% 2020: 35%
5% 14%
0% 30%
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19
Current account balance 25%
% of GDP
12% 20%
10%
8%
15%
6%
2020:
4% 2.0%
10%
2%
0%
-2% 5%
-4%
-6% 0%
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 '92 '95 '98 '01 '04 '07 '10 '13 '16
Source: (Left) IMF; (Right) World Bank; J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
9Importance of Chinese trade to the world GTC | 10
China’s share of global trade China’s major trading partners
growth drivers
China exports and imports as % of world total, goods only U.S. dollars, billions, rolling 12-month sum, goods only, as of Jun. 2021
Long-term
16% 2020:
15% -$400 -$200 $0 $200 $400 $600
U.S. $383
14%
Hong Kong $337
12%
Share of world EU $160
exports
10% 2020: ASEAN $99
12%
UK $66
8%
India $60
6% Share of world Canada $22
imports
4% Japan -$48
Imports
Brazil -$57 Exports
2% Trade balance
South Korea -$70
0% Taiwan -$177
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19
Source: (Left) IMF, (Right); China Customs; J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
10Chinese consumer GTC | 11
Contribution to global consumption growth China’s contribution to global spending on luxury goods
growth drivers
Household consumption, constant U.S. dollars Chinese consumers, % of total, both domestic and overseas spending
Long-term
45%
China U.S. Europe Rest of world 40%
40%
100% 35%
35% 32%
30%
90% 25%
26% 19%
20%
80% 39% 42% 15%
50% 10%
70% 58% 5%
15% 0%
2012 2018 2020 2025F*
60%
50% 18% 11% China’s Singles’ Day vs. U.S. holiday sales
Gross merchandise value, U.S. dollar, billions
13% $80
Prime Day Cyber Monday $74.1
40% 36%
7% $70 Black Friday China Singles' day
25% Thanksgiving Sat. & Sun.
$60
30%
16% $50 $44.8
35%
26%
20% $40 $35.7 $38.4
$14.5
$28.5 $30.8
$30 $11.6
23% $10.2 $9.0
10% 20% 22% $20 $7.4
$6.2 $10.8
8% 10% $10 $9.4
$7.9
0% $7.2 $10.4
$0 $4.2
2000 2005 2010 2015 2019 2018 2019 2020
Source: (Left) World Bank; (Top right) McKinsey & Company “China Luxury Report 2019”; (Bottom right) Alibaba, Adobe Analytics, Amazon; J.P. Morgan Asset
Management.
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.
*Forecast based on McKinsey & Company “China Luxury Report 2019”.
Guide to China. Data are as of July 31, 2021.
11Household savings GTC | 12
Household savings rate Household wealth by asset type
growth drivers
% household disposable income, latest* % of total, as of Dec. 2019
Long-term
40% 36% Property Cash & deposits Equity & mutual fund
35%
Insurance & pension Other securities Others
30%
100% 1% 3% 2%
25% 4% 0%
1% 9% 4%
20% 3%
15% 90%
7%
15% 5%
22%
10% 8% 23%
6% 80% 12%
4%
5% 1% 19%
0% 70%
UK Japan Euro Area U.S. Mexico China 17%
60%
Social benefits to households** 32%
In cash, % of GDP 50%
20%
Euro Area U.S. UK Japan China Mexico 28%
40%
73%
15% 66%
30% 15%
10%
20%
30%
5% 24%
10%
0% 0%
China Korea Taiwan U.S.
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Source: (Left) OECD, (Right) Goldman Sachs; J.P. Morgan Asset Management.
*OECD data for household savings rate is lagged with the latest figure varying by country: UK (2019), Japan (2018), Euro Area (2019), U.S. (2018), Mexico (2019), China (2016).
**Social benefits in cash include cash transfers by the government for pension and non-pension benefits.
Guide to China. Data are as of July 31, 2021.
12Demographic trends GTC | 13
Total population Crude birth and death rate
growth drivers
Billion people Per 1,000 population
Long-term
1.6 25
Forecast Forecast
1.4
20 Birth rate
1.2
Death rate
1.0
15
0.8
Total population 10
0.6
Urban population
0.4
5
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
Source: CEIC, United Nations, National Bureau of Statistics of China, J.P. Morgan Asset Management.
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.
Guide to China. Data are as of July 31, 2021.
13Employment and human capital GTC | 14
Employment Education of labor force
growth drivers
As % of working-age population Million people % of labor force
Long-term
90% 800 20%
Employment as % of working-age
population (age 15-64) High school College
Total employment (RHS) 18%
University Graduate
16%
750
1990-2020 CAGR: 0.80%
14%
85%
12%
700 10%
8%
80%
6%
650
4%
2%
75% 600 0%
'90 '95 '00 '05 '10 '15 '20 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19
Source: National Bureau of Statistics of China, J.P. Morgan Asset Management. (Left) CEIC; (Right) China Labor Statistical Yearbook.
High school includes general high school and medium vocational education. College is three-year education without bachelor degree granted. College includes high
vocational education after 2015.
Guide to China. Data are as of July 31, 2021.
14Technological progress GTC | 15
Patent applications Research and development
growth drivers
# of patent filings* at World Intellectual Property Org., 1996-2020 Expenditures as % of GDP, 1996-2018
Long-term
80,000 4%
United States Japan
70,000
Germany China
60,000 3%
50,000
40,000 2%
30,000
20,000 1%
United States Japan
10,000
Germany China
0 0%
'96 '01 '06 '11 '16 '96 '01 '06 '11 '16
Source: J.P. Morgan Asset Management; (Left) Wind, World Intellectual Property Organization; (Right) World Bank.
*Patent filings include Patent Cooperation Treaty provides international patent protection.
Guide to China. Data are as of July 31, 2021.
15Chinese private equity markets GTC | 16
Number of unicorns by city* Venture capital fundraising
growth drivers
Hurun Global Unicorn Index 2020, top 10 cities Capital raised, % of global total
Long-term
80% 2020:
U.S. 66%
70%
Beijing 93
60%
San Francisco 68 50%
40%
Shanghai 47 30% China
2020:
20% 7%
New York 33 10%
0%
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Hangzhou 20
China venture capital exits
Shenzhen 20 Exit value (U.S. dollar, billions) and count
$180 275 300
Chinese unicorns % of total $152
Number $160 Exit value ($B) Exit count
London by sector valuation
16 219 250
FinTech 18 52% $140
$115
$120 170 200
Palo Alto 12 E-commerce 39 15%
$100
Logistics 16 15% 121 120 $65 179 150
$80
Nanjing 11 Artificial
21 9% $60 $55 100
Intelligence 58 118
48 42 49 $35
Health Tech 16 9% $40 31
15 14 22 $17 $18 50
Redwood City 10 $20 $14 $17 $7
$9 $4 $2
$2 $1
$0 0
0 20 40 60 80 100 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: (Left) Hurun Research Institute; (Right) KPMG, PitchBook, J.P. Morgan Asset Management.
*Unicorns defined as companies worth at least a billion dollars and not yet listed on a public exchange. Unicorn valuations are a snapshot of March 31,2020.
Venture capital fundraising and exits based on KPMG’s 4Q20 Venture Pulse Report – Asia.
Guide to China. Data are as of July 31, 2021.
16Emission targets and energy mix GTC | 17
Greenhouse gas emission targets China’s energy mix
growth drivers
Billion tonnes/year, CO2 equivalent % of primary energy
Long-term
18 100%
Current Path to net zero
China policy Forecast
forecast 90%
16 U.S.
EU 80%
14
70%
12
60%
10
50%
8 40%
30%
6
20%
4
10%
2
0%
'95 '00 '05 '10 '15 '20 '25 '30 '35 '40 '45 '50
0 Oil Coal Gas Hydro Nuclear Renewables*
'90 '00 '10 '20 '30 '40 '50 '60
Source: J.P. Morgan Asset Management.; (Left) Climate Action Tracker. Current policy forecast is the post-Covid forecast provided by Climate Action Tracker; (Right)
BP Energy Outlook 2020. Forecast is based on BP’s scenario for global net-zero emissions by 2050. 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.
*Renewables include wind, solar, geothermal, biomass, biomethane and biofuels.
Guide to China. Data are as of July 31, 2021.
17Five-Year Plans GTC | 18
China’s GDP per capita vs. Five Year Plans (FYP)
growth drivers
Nominal, U.S. dollars
Long-term
$18,000 Forecast*
12th FYP: 13th FYP:
• Rebalance to • Innovation
$16,000 consumption from • Environment
investment • Supranational
• Shift coastal cities • Reform one-child
$14,000 policy
from manufacturing
to R&D and services • New urbanization
$12,000 • Expand highways
11th FYP:
and highspeed
• Quantitative targets 14th FYP:
railways
$10,000 • 7.5% annual GDP • Expand domestic
• Prudent monetary
growth demand while
policy and curb
• Increase services’ keeping
$8,000 housing prices
share in GDP and development of
10th FYP: employment external sectors
• 7% GDP growth • Create 45mn jobs • Improve self-
$6,000
• Boost sufficiency of key
international technologies and
$4,000 competitiveness products
• Balance external • Promote common
position prosperity
$2,000
• Environmental
protection
$0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25
Source: CEIC, IMF-World Economic Outlook, J.P. Morgan Asset Management.
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.
*Nominal GDP per capita forecast from the IMF.
Guide to China. Data are as of July 31, 2021.
18Covid-19: Fatalities and vaccinations GTC | 19
Covid-19 fatalities Covid-19 vaccine rollout
Cumulative COVID-19 fatalities per million people Total vaccine doses administered per 100 people
2,000 140
China EU India U.S.
China EU India U.S.
1,800
120
1,600
indicators
Cyclical
1,400 100
1,200
80
1,000
60
800
600 40
400
20
200
0 0
Jan '20 Apr '20 Jul '20 Oct '20 Jan '21 Apr '21 Jul '21 Dec '20 Jan '21 Feb '21 Mar '21 Apr '21 May '21 Jun '21 Jul '21
Source: Our World in Data, Johns Hopkins University, J.P. Morgan Asset Management.
Limited testing and challenges in the attribution of the cause of death means that the number of confirmed deaths may not be an accurate count of the true number of
deaths from COVID-19. Vaccine doses are counted as single doses, and may not equal the total number of people vaccinated, depending on the specific dose regime.
Guide to China. Data are as of July 31, 2021.
19Purchasing Managers’ Index GTC | 20
Manufacturing PMIs Services PMIs
Index Index
60 60 Jul.
2021:
54.9
NBS Caixin/Markit
55
55
Jul.
indicators
2021:
Cyclical
50.4 50
Jul.
2021:
50 53.3
Jul. 45
2021:
50.3
40
45
NBS Caixin/Markit
35
40
30
35 25
'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: National Bureau of Statistics of China, Caixin/Markit, J.P. Morgan Asset Management.
In both PMI series, the reading above 50 represents expansion in activities compared with the previous month, while the reading below 50 means economic activities
are weaker on a monthly basis. Caixin/Markit PMI surveys 500 mainly small and medium sized enterprises, while the NBS PMI surveys 3,000 companies, including
state-owned enterprises, and is biased toward large-sized enterprises.
Guide to China. Data are as of July 31, 2021.
20Keqiang index GTC | 21
Keqiang index Components of Keqiang index
Index, year-over-year change, 3-month moving average Year-over-year change, 3-month moving average
30% 50%
Industrial electricity consumption
40%
25%
Mid- to long-term loans
indicators
Cyclical
Railway cargo volume
30%
20%
20%
15%
10%
Jun.
10% 2021:
12.6% 0%
5%
-10%
0% -20%
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: Wind, National Bureau of Statistics of China, People’s Bank of China, J.P. Morgan Asset Management.
Keqiang index = railway cargo volume * 25% + industrial electricity consumption * 40% + outstanding mid- to long-term loan * 35%, all the components are based on
Year-over-year change. The index was created based on Premier Li Keqiang’s preferred three economic indicators for China’s cyclical position.
Guide to China. Data are as of July 31, 2021.
21Fixed asset investment GTC | 22
Fixed asset investment Fixed asset investment by sector
Year-over-year change, year-to-date Year-over-year change, year-to-date
40% Jun. 2021 y/y y/2y annualized 40% Jun. 2021 y/y y/2y annualized
Aggregate 12.6% 4.5% Real estate 15.0% 8.3%
35% 35%
Public 9.6% 5.8% Manufacturing 19.2% 2.6%
Private 15.4% 3.4% 30% Infrastructure (excl. electricity) 7.8% 2.4%
30%
25% 25%
indicators
Cyclical
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
-5%
-5%
-10%
-10%
-15%
-15%
-20%
-20% -25%
-25% -30%
-30% -35%
'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: CEIC, National Bureau of Statistics of China, People’s Bank of China, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
22Industrial cycle GTC | 23
Industrial production and profits Inventories and capacity utilization
Year-over-year change, 3-month moving average Year-over-year change* Capacity used as % of total capacity Year-over-year change
40% 160% 80% 16%
Capacity utilization
Jun. 2021 y/y y/2y annualized
35% Industrial value-add 8.3% 6.5% 140% 78% Inventory (RHS) 14%
Industrial profits
66.9% 20.6%
30% (year-to-date, RHS) 120% 76%
12%
indicators
Cyclical
25% 100% 74%
10%
20% 80% 72%
8%
15% 60% 70%
6%
10% 40% 68%
4%
5% 20% 66%
2%
0% 0% 64%
-5% -20% 62% 0%
-10% -40% 60% -2%
'11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: Wind, National Bureau of Statistics of China, J.P. Morgan Asset Management.
*Secondary vertical axis for industrial profits cut off in 2021 to maintain a more reasonable scale, as growth in industrial profits reached 178.9% year-over-year in February.
Guide to China. Data are as of July 31, 2021.
23Consumption GTC | 24
Retail sales Automobile sales
Year-over-year change Millions of units, saar
35% 30
Jun. 2021
30% Jun. 2021 y/y y/2y annualized China 19.7
Retail sales 12.1% 4.9% U.S. 15.4
Euro Area 8.5
25% 25
indicators
20%
Cyclical
15% 20
10%
5% 15
0%
-5% 10
-10%
-15% 5
-20%
-25% 0
'15 '16 '17 '18 '19 '20 '21 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: (Left) Wind, National Bureau of Statistics of China; (Right) Association of Automobile Manufacturers, ECB, BEA, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
24Chinese consumer sentiment GTC | 25
PBOC depositor survey*
Percentage among respondents Index
30% 60
Plans to increase spending
28% 58
56
26%
indicators
Cyclical
54
24%
52
22%
50
20%
48
18%
46
16%
44
Income sentiment index
14% 42
12% 40
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: People’s Bank of China, J.P. Morgan Asset Management.
*The PBOC depositor survey is conducted quarterly by China’s central bank to gauge consumers’ sentiment. The surveys are randomly distributed to 20,000 depositors at
400 bank branches in 50 cities and measure the participant’s plans to increase spending (as opposed to saving or investing). The income sentiment index is composed with
the same diffusion index methodology as the PMI, in which a reading above 50 signifies an improvement in income while a reading below 50 suggests a decline in income.
Guide to China. Data are as of July 31, 2021.
25Measures of unemployment GTC | 26
Urban registered unemployment rate Urban survey unemployment rate
Quarterly, 2006-2021 Monthly, 2018-2021
4.5% 6.5%
4.3%
indicators
6.0%
Cyclical
4.1%
5.5%
3.9% 1Q21:
3.9%
5.0%
3.7% Jun.
2021:
5.0%
3.5% 4.5%
'06 '09 '12 '15 '18 '21 '18 '19 '20 '21
Source: National Bureau of Statistics of China, Wind, J.P. Morgan Asset Management.
(LHS) The urban registered unemployment rate is calculated using a range of unemployed workers. It only covers job seekers who are registered with the local
governments’ employment service department. (RHS) The urban survey unemployment rate includes a much wider definition of unemployed workers than the
registered unemployment rate. The urban survey unemployment rate began in 2018 it is now the major indicator used by policymakers for unemployment.
Guide to China. Data are as of July 31, 2021.
26China e-commerce GTC | 27
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%
Online sales of: Jun. 2021
Food 23.5%
60% Apparel 24.1%
25% Daily use products 16.7%
50%
indicators
Cyclical
40%
20%
Jun. 2021:
23.7%
30%
15% 20%
10%
10%
0%
-10%
5%
-20%
0% -30%
'15 '16 '17 '18 '19 '20 '21 '16 '17 '18 '19 '20 '21
Source: National Bureau of Statistics, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
27China new energy vehicles GTC | 28
China’s new energy vehicles (NEV)* Global electric vehicle sales
% of total China vehicle sales Millions
20% 4
18% Countries/Regions 2020
China 1.2
Europe 1.3
16% U.S. 0.3
indicators
3 Japan & Korea 0.1
Cyclical
State Council’s goal: NEV Rest of the world 0.1
14% penetration to reach 20% by
2025
12%
10% 2
8%
6%
1
4%
2%
0% 0
'16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '16 '17 '18 '19 '20
Source: J.P. Morgan Asset Management. (Left) China Association of Automobile Manufacturers. (Right) Marklines, Bloomberg New Energy Finance.
*New energy vehicles (NEV) refers to plug-in electric vehicles that are eligible for public subsidies and includes only pure electric vehicles and plug-in hybrid electric
vehicles. According to an industry development plan issued by the State Council in November 2020, the share of NEV in China will expand to 20% in 2025 from 5% in
2020. 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.
Guide to China. Data are as of July 31, 2021.
28China’s housing market GTC | 29
China and U.S. residential real estate investment Price to income ratios for major cities around the globe
USD billions and % of nominal GDP Ratio of median apartment prices to median family disposable income, years
$1,800 20% of income, as of mid-year 2021
Billion $ % of GDP 50x
46x
$1,600 18%
45x 43x 42x
China ($Bn) China (% GDP)
16% 40x
$1,400
indicators
U.S. ($Bn) U.S. (% GDP)
Cyclical
14% 35x 33x
$1,200 31x
30x
12%
$1,000 25x
10% 21x 20x
20x 18x
$800
8% 15x
15x 14x 13x
13x
12x
$600
6% 10x 9x
8x
$400 5x
4%
0x
$200 2%
$0 0%
'02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: J.P. Morgan Asset Management.; (Left) U.S. Bureau of Economic Analysis, National Bureau of Statistics of China, U.S. National Bureau of Economic
Research, “Peak China Housing” by Kenneth Rogoff and Yuanchen Yang, August 2020; (Right) Numbeo.
Guide to China. Data are as of July 31, 2021.
29Foreign trade GTC | 30
Goods trade Balance of trade
Year-over-year change, seasonally adjusted USD billions, 3-month moving average
50% $75
Jun. 2021 y/y y/2y annualized
Imports 36.2% 13.4%
Exports 26.1% 12.5%
40% $60
indicators
Goods
Cyclical
30% $45
20% $30
Jun.
2021:
$46.6
10% $15
0% $0
Jun.
-10% -$15 Services 2021:
-$7.2
-20% -$30
'15 '16 '17 '18 '19 '20 '21 '15 '16 '17 '18 '19 '20 '21
Source: CEIC, China Customs, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
30China/U.S. trade relationship GTC | 31
China/U.S. trade tensions Phase I trade agreement progress
Goods export value, rolling 12 months, June 2018=100 Chinese import data, U.S. dollars, billions, as of Jun. 2021
110
U.S. & China $250
impose 25% tariffs First-stage trade
Target
On $34B of goods agreement signed
105
Actual
$207
100 $200
indicators
Cyclical
China $173
exports
95
to U.S.
$150
90
85
U.S. imposes10% China $100 $99
$100
tariffs on $200B/ imports
80
China 5-10% from U.S.
on $60B $68
U.S. proposes
75 increase from $50
10% to 25% on
$200B
70
U.S. & China U.S. proposes 10% tariffs on $300B/
impose 25% tariffs China proposal on $75B
on $16B of goods $0
65
2020 YTD 2021
Jun-'18 Dec-'18 Jun-'19 Dec-'19 Jun-'20 Dec-'20 Jun-'21
Source: China Customs, J.P. Morgan Asset Management; (Left) CEIC; (Right) Peterson Institute for International Economics.
Guide to China. Data are as of July 31, 2021.
31China–U.S. economic relations GTC | 32
U.S. and China relationship Plans to move production out of China in the next 3 years
% of U.S. adults who say they have an unfavorable opinion of China* Of companies with production capacity in China, % considering moving**
100% 90%
83%
82%
80%
Republican / Lean Republican 80%
60%
68%
70%
indicators
40%
Cyclical
Democrat / Lean Democrat
20% 60%
0%
'05 '07 '09 '11 '13 '15 '17 '19 '20 50%
Foreign direct investment 40%
USD billions
$20 China FDI into U.S.
U.S. FDI into China 30%
$15
$10 20%
$5
10% 7%
6%
$0
3%
1%
0%
-$5 0%
Not planning Move Move Move Move Move
-$10 to move 1-10% 11-20% 21-30% over 30% all
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 production
Source: FactSet, J.P. Morgan Asset Management; (Top left) Pew Research Center; (Bottom left) U.S. Census Bureau, (Right) The American Chamber of Commerce in Shanghai.
*Pew Research Center survey of U.S. adults conducted June 16 - July 14, 2020. Question asked: “Please tell me if you have a very favorable, somewhat favorable, somewhat
unfavorable, or very unfavorable opinion of China”.
**Survey was taken from November 11 to November 15, 2020. Responses were received from 124 companies.
Guide to China. Data are as of July 31, 2021.
32Inflation GTC | 33
Consumer price index Producer price index
Year-over-year change Year-over-year change
9% 25% 15%
Jun. 2021 Jun. 2021
Headline CPI 1.1% Headline PPI 8.8%
Core CPI 0.9% Consumer goods 0.3%
7% Food inflation (RHS) -1.7% 20% Producer goods 11.8%
10%
indicators
Cyclical
5% 15%
5%
3% 10%
1% 5%
0%
-1% 0%
-5%
-3% -5%
-5% -10% -10%
'11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: CEIC, National Bureau of Statistics of China, J.P. Morgan Asset Management;
Guide to China. Data are as of July 31, 2021.
33Money supply GTC | 34
Money supply Composition of monetary base
Year-over-year change CNY trillion
40% 35
Foreign reserves
Claims on depositary corporations
35%
30 Claims on financial corporations
M1 M2
30%
25
25%
20
Monetary, fiscal
& FX policy
20%
15
15%
10
10%
5
5%
0% 0
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Source: Wind, People’s Bank of China, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
34Central bank operations: Liquidity injections GTC | 35
Liquidity injections by the PBoC
RMB billions, net injection
2,400
Open market operations*
2,000
Monetary policy tools**
1,600
1,200
Monetary, fiscal
800
& FX policy
400
0
-400
-800
-1,200
'14 '15 '16 '17 '18 '19 '20 '21
Source: CEIC, People’s Bank of China (PBoC), J.P. Morgan Asset Management.
*Open market operation (OMO) includes reverse repo, repo and central bank bill issuance by the People’s Bank of China.
**Monetary policy tools include short-term liquidity operations (SLO), standing liquidity facility (SLF), medium-term liquidity facility (MLF) and pledged supplementary lending (PSL).
Guide to China. Data are as of July 31, 2021.
35Central bank operations: policy rates GTC | 36
Key policy rates Policy rate Description Current
Per annum New benchmark lending rate,
7.5% Loan prime rate 3.85%
ceiling of interest rate corridor
Medium-term Most representative money
2.95%
lending facility market tool
Interbank repo Interbank market rate 2.41%
6.0%
Deposit rate Floor of interest rate corridor 1.50%
Lending rate
4.5% (1-year) Loan prime rate
(1-year)*
Monetary, fiscal
& FX policy
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
Source: CEIC, People’s Bank of China (PBoC), National Interbank Funding Center, J.P. Morgan Asset Management.
*Starting from August 20, 2019, the PBoC releases a monthly 1-year and 5-year loan prime rate (LPR) based on quotes from 18 banks. For this new monthly quote,
banks are required to submit them in the form of open market operation rates (especially MLF) plus a margin to the national inter-bank lending center. The central bank
requests all commercial banks to reference the finalized LPR to price their new lending and use LPR as the benchmark rate in floating rate loan contracts going forward.
Guide to China. Data are as of July 31, 2021.
36Central bank operations: reserve requirements GTC | 37
Reserve requirement ratio
22%
20%
18%
Large banks
16%
Monetary, fiscal
& FX policy
14%
Jul. 2021:
12.0%
Small- and medium-sized banks
12%
Jul. 2021:
10% 9.0%
8%
'09 '11 '13 '15 '17 '19 '21
Source: CEIC, People’s Bank of China (PBoC), J.P. Morgan Asset Management.
Large banks are six major banks in China, including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank,
Bank of Communications, Postal Savings Bank of China. The other banks are categorized as small- and medium-sized banks.
PBoC sets favorable required reserve ratio for banks which have met specific criteria, such as loans to small and medium-sized enterprises and agricultural sectors.
These measures have significantly brought down the actual RRR for banks. According to the PBoC, after the latest RRR cut on July 15, 2021, the realized weighted
average RRR is 8.9%.
Guide to China. Data are as of July 31, 2021.
37Credit conditions GTC | 38
Credit cycles
Credit growth – nominal GDP growth, 3-month moving average
25%
Rapid rebound in CPI & PPI
20%
15% Tightening:
125bps rate
Loosening: hikes, BASEL III Interbank
216bps rate cuts, Loosening: Policy
adoption liquidity 165bps rate normalization
Monetary, fiscal
4tn stimulus
crunch cuts, LGFV
COVID-19
& FX policy
10% debt swap** Tightening:
Implementation of outbreak
Loosening:
de-leveraging
56bps rate
A-share policies
cuts, trust
boom market crash Loosening:
5% Tightening:
RRR cuts
shadow
Jun.
banking Rate cut
tightening 2021:
0.8 ppts
0%
U.S. – China
Global Financial Crisis Wenzhou small and medium trade
enterprise (SME) crisis* tensions
-5%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: CEIC, People’s Bank of China, J.P. Morgan Asset Management.
Credit growth measures the year-over-year growth of outstanding total social financing.
*Wenzhou SME crisis refers to the wave of bankruptcies and funding problems faced by a large number of SMEs in Wenzhou in 2011. **LGFV refers to local
government financing vehicle.
Guide to China. Data are as of July 31, 2021.
38Credit impulse and commodity prices GTC | 39
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%
Monetary, fiscal
& FX policy
5% 20%
0% 0%
-5% -20%
-10% -40%
Credit impulse
-15% -60%
'05 '07 '09 '11 '13 '15 '17 '19 '21
Source: Bloomberg, CEIC, People’s Bank of China, J.P. Morgan Asset Management.
Credit impulse measures the year-over-year change in credit flow (net flow of total social financing) as a percentage of nominal GDP.
Guide to China. Data are as of July 31, 2021.
39Total credit GTC | 40
Total social financing
RMB billions Year-over-year change, 3-month moving average
6,000 250%
Bank loans + direct financing
Total social financing
Off-balance sheet financing
5,000 200%
4,000 150%
3,000 100%
Monetary, fiscal
& FX policy
2,000 50%
1,000 0%
0 -50%
-1,000 -100%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: CEIC, People’s Bank of China, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
40Fiscal policy GTC | 41
Fiscal revenues and expenditures* Fiscal balance
balance***
Year-over-year change, 3-month moving average % of nominal GDP
30% 0%
Expenditures
20%
-2% Budget deficit
10%
-4%
0%
Actual deficit
-10% Revenues -6%
-20%
Monetary, fiscal
'14 '15 '16 '17 '18 '19 '20 '21 -8%
& FX policy
Government financing**
RMB billions -10% Augmented deficit
2,000
Special local government bonds
1,800
General local government bonds
1,600 -12%
1,400 Central government bonds
1,200
-14%
1,000
800
600 -16%
400
200
0 -18%
'18 '19 '20 '21 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
'21F
Source: CEIC, Ministry of Finance of China, J.P. Morgan Asset Management; (Right) Wind, Agricultural Development Bank of China, China Development Bank, China Trustee Association,
People’s Bank of China. *Fiscal revenues include taxes, government funds, which are mostly derived from local government land sales, and other government revenues. Fiscal expenditures
include government spending of funds raised from taxes, government funds and general bond issuance. **General local government bonds are issued to raise funds and offset fiscal deficits so as
to maintain the ordinary operation of local governments. They are backed by the future fiscal revenue of the local governments. Special local government bonds are issued to support specific
infrastructure and public projects. They are backed by the future revenue generated from the projects. ***Actual deficit = fiscal revenues - fiscal expenditures (as shown in top left chart). Budget
deficit = actual deficit adjusted with the fiscal stability fund. Augmented deficit is an estimate of all the fiscal resources used by the government to support economic growth, i.e. fiscal balance plus
investment via local government financing vehicles, policy banks and other channels. 2020 is a J.P. Morgan Asset Management estimate.
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.
41 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. Guide to China. Data are as of July 31, 2021.Yuan exchange rates GTC | 42
Chinese yuan exchange rates vs. USD Exchange rate Description
Index, Jan. 2016 = 100 USD/CNY Chinese Yuan in onshore market vs. U.S. dollar
106
USD/CNH Chinese Yuan in offshore market vs. U.S. dollar
Stronger yuan CFETS CNY China Foreign Exchange Trade System basket of
104 Index 24 currencies traded against the Chinese Yuan
102
100
Monetary, fiscal
98
& FX policy
96
94
92
90 Weaker yuan
88
'16 '17 '18 '19 '20 '21
Source: FactSet, China Foreign Exchange Trade Center, J.P. Morgan Economic Research, J.P. Morgan Asset Management.
Past performance is not a reliable indicator of current and future results.
Guide to China. Data are as of July 31, 2021.
42Yuan trading band GTC | 43
Evolution of RMB exchange rate and allowable trading bands
CNY/USD
5.8
6.0
6.2
6.4
Monetary, fiscal
& FX policy
6.6
6.8
7.0
CNYUSD exchange rate
7.2 PBOC-set target exchange rate
Allowable trading band
7.4
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: Refinitiv Datastream, J.P.Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
43Yuan and FX reserves GTC | 44
USD/CNY and change in FX reserves
USD / CNY (inverted)
Monetary, fiscal
& FX policy
Change in monthly FX reserves
(USD billions)
Source: FactSet, People’s Bank of China, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
44Chinese currency in global perspective GTC | 45
Currency weights in IMF’s SDR basket Global central bank reserve manager holdings
% of total
100% USD EUR JPY GBP RMB CAD AUD CHF Other
Pound Sterling
8% 100%
90% Japanese Yen
8%
90%
80% Chinese
Yuan
11% 80%
70%
70%
60% Euro
31% 60%
Monetary, fiscal
& FX policy
50%
50%
40%
40%
30%
30%
U.S. Dollar
20% 42% 20%
10% 10%
0% 0%
Currency weights in SDR basket '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 1Q21
'21
Source: IMF, J.P. Morgan Asset Management.
SDR refers to the IMF’s Special Drawing Rights basket.
Guide to China. Data are as of July 31, 2021.
45Size of Chinese and global equity markets GTC | 46
Stock exchange market capitalizations
Trillions of U.S. dollars, 2020
$50 $45.3
$45
$40
$35
$30
$25
$20
$15 $12.2
$10 $6.7 $6.1
$4.0
$5
$0
NYSE & Nasdaq Shanghai & Shenzhen Japan Hong Kong London
Stock exchange market capitalizations
Trillions of U.S. dollars
$50
$40 NYSE & Nasdaq Shanghai & Shenzhen Hong Kong
Equities
$30
$20
$10
$0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: World Federation of Exchanges, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
46Types of and access to Chinese equities GTC | 47
Share class Definition Currency Foreign investor access Indices
SZSE Composite Index,
Securities incorporated in Mainland China, listed on the Shanghai or Shenzhen QFII (CNY), RQFII (CNH), Shanghai Composite Index,
A-shares RMB
Stock Exchange Northbound Stock Connect CSI 300, MSCI China A,
Onshore
MSCI China
Securities incorporated in Mainland China, listed on the Shanghai or Shenzhen USD (Shanghai),
B-shares No restrictions
Stock Exchange HKD (Shenzhen)
Securities incorporated in Mainland China, listed on the Hong Kong Stock
H-shares HKD
Exchange
Securities of state-ow ned companies incorporated outside Mainland China, Hang Seng Index,
Red-chips HKD
listed on the Hong Kong Stock Exchange MSCI China
Offshore No restrictions
Securities of non-government ow ned companies incorporated outside
P-chips HKD
Mainland China, listed on Hong Kong Stock Exchange
Overseas Securities (including ADRs) listed on foreign exchanges such as the Nasdaq USD, SGD
MSCI China
(N and S-shares) and NYSE (N-shares), and Singapore Exchange (S-shares)
Market capitalization and constituents by market
MSCI indices, as of Jul. 2021
Market capitalization, billions of US$ Number of constituents
$1,600 600
$1,363
$1,400 $1,309
500
$1,200
Equities
473 400
$1,000
$800 300
$600 $502
$446 200
$400 92
81
$123 38 100
$200
$2 2 35
$0 0
A-shares B-shares H-shares Red-chips P-chips Overseas
Source: MSCI, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
47Chinese initial public offerings GTC | 48
Initial public offerings IPO breakdown by sector
Includes Shanghai, Shenzhen, Hong Kong, and ADRs Share of current market value, 2016-2021
$150 536 550
Value (USD billions) Deal count Sectors % of market value
502 $132
$135 500 Consumer 28.9%
Financials 20.6%
Industrial 19.1%
450
$120 Comm. 14.2%
Tech. 9.3%
400 Materials 4.1%
$105
Energy 2.4%
350 Utilities 1.1%
329
321
$90
282 $75 300
$71
$75
217 250
IPO breakdown by share type
Share of current market value, 2016-2021
$60 $52
$48 $64
200
172
$45
Equities
$35 150
Hong Kong
29%
$30
100 Shanghai &
Shenzhen
ADRs 58%
$15 50 13%
$0 0
2016
2016 2017
2017 2018
2018 2019
2019 2020
2020 2021
1H20 2022
YTD
Source: Bloomberg, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
48Chinese stocks listed in the U.S. GTC | 49
Chinese stocks listed on U.S. exchanges Chinese stock performance by listing
2006-2021 Index level, U.S. dollars, monthly
$3,000 Aggregate market cap Number of ADRs 300 800
285
(USD billions)
700
249 S&P/BNY Mellon
$2,500 $2,396 250
China Select ADR Index
600
212$2,095
$2,000 200
177 500
$1,500 137 $1,349 150 400
$1,202
111 $1,022
101 300 CSI 300
93
$1,000 100 Index
77
81 $743$774
75
Equities
$688 70
$910
59 $563$565 200
$476 53 $549 $487
$500 50
41
33 $506 100
$343
$0 0 0
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 June
YTD '07 '09 '11 '13 '15 '17 '19 '21
21
Source: Bloomberg, Wind, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
49Sector composition of offshore and onshore equities GTC | 50
Sector weights
% of index market capitalization
50%
41% S&P 500 MSCI Europe Hang Seng CSI 300
40%
30% 28%
23%
20%
17% 17%
14% 15% 15%
13% 14%
12% 13%
12% 12%12%
Equities
11% 11% 11% 10%
10% 8% 8% 8% 9%
6% 6%
5% 5%
4% 4% 4% 4%
3% 3%
2% 2% 2% 3% 3% 2% 2% 2%
1%
0% 1%
0%
Information Health Care Consumer Communication Financials Industrials Consumer Real Estate Materials Energy Utilities
Technology Discretionary Services Staples
Source: China Securities Index, Hong Kong Exchange, FactSet, Standard & Poor’s, MSCI, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
50State-owned enterprise representation in key stock indices GTC | 51
Offshore: Hang Seng Index Onshore: CSI 300 Index
SOE % of sector and % of overall index market capitalization, as of Jul. 2021 SOE % of sector and % of overall index market capitalization, as of Jul. 2021
100% 100%
100%
90%
90%
80%
80% 77%
80%
70%
70%
70%
61%
60% 60%
50% 50%
40% 40% 37%
34%
32% 32%
30% 26% 30%
23%
21%
19% 18%
20% 17% 20% 16%
11%
Equities
10% 10%
0% 0% 0% 0% 0% 0% 1%
0% 0%
Source: China Securities Index, Hong Kong Exchange, FactSet. Standard & Poor’s, MSCI, J.P. Morgan Asset Management.
SOE refers to state-owned enterprise, as defined by FactSet based on government ownership. A J.P. Morgan Asset Management adjustment was made for CSI 300 financials.
Guide to China. Data are as of July 31, 2021.
51Market structure of offshore vs. onshore equities GTC | 52
Average daily turnover Participation by type of investor
U.S. dollars, billions, 2020 % of total trading value, latest*
$400 Individual investors Institutional investors
100%
$356.0
$350 18%
90%
$300
80%
70%
$250
60% 80%
$200
50%
40% 82%
$150
$130.4
30%
Equities
$100
20%
$50
10% 20%
$13.4
$0 0%
Hong Kong Shanghai & Shenzhen U.S. Shanghai Hong Kong
Source: J.P. Morgan Asset Management; (Left) World Federation of Exchanges; (Right) CEIC, Hong Kong Exchanges and Clearing Limited, Shanghai Stock Exchange.
Total value of share trading includes electronic order book, negotiated deals, and reported trades.
*Latest is 2017 for Shanghai and 2019 for Hong Kong due to data availability.
Guide to China. Data are as of July 31, 2021.
52Annual returns and intra-year declines GTC | 53
MSCI China intra-year declines vs. calendar year returns
Local currency, average intra-year drops of 29.7% (median -23.8%) and annual returns positive in 15 of 28 years of on average 6.5%
100%
80 79
80%
64
59
60%
52
40% 35
33
26
19 21
20% 16
10
3 5
0
%
-1 -1
-10 -9
-20% -13 -11 -13
-18 -16 -15 -17
-23 -20 -20 -19 -20
Equities
-22 -22 -17 -22 -22
-26 -26 -25 -17
-31 -32 -30 -31
-40% -34 -35 -33
-38 -47 -37
-39
-44
-47
-53 -51 -52
-60%
-65
-68
-80%
'93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Source: FactSet, MSCI, J.P. Morgan Asset Management.
Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For
illustrative purposes only. Returns are calendar year returns from 1993 to 2020 for the MSCI China.
Guide to China. Data are as of July 31, 2021.
53Chinese equities: Valuations GTC | 54
MSCI China: Forward P/E ratio Std. dev.
26x over-
Valuation /under- Tim e
Index m easure Latest Average valued period
24x MSCI China Forw ard P/E 13.8x 11.8x 0.7 20-year
MSCI China Price to book 2.1x 2.2x -0.1 20-year
22x MSCI China Dividend yield 1.9% 2.2% 0.5 20-year
Hang Seng China Enterprises (H-shares) Forw ard P/E 10.1x 10.3x -0.1 15-year
CSI 300 (A-shares) Forw ard P/E 14.6x 15.2x -0.1 15-year
20x ChiNext Forw ard P/E 48.9x 35.3x 1.4 10-year
SME Board Forw ard P/E 22.5x 23.9x -0.3 5-year
18x
16x
+1 Std. dev.: 14.5x
14x
Jul. 2021:
Average: 11.8x 13.8x
12x
Equities
10x
-1 Std. dev.: 9.2x
8x
6x
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Bloomberg, MSCI, J.P. Morgan Asset Management.
Price-to-earnings ratio based on next twelve months earnings estimates. Dividend yield based on next twelve months dividend estimates. Price-to-book based on
trailing 12 months book value.
Guide to China. Data are as of July 31, 2021.
54Chinese equities: Relative valuations vs. U.S. equities GTC | 55
MSCI China: Price-to-earnings discount vs. U.S. MSCI China Technology: Price-to-earnings premium to U.S.
MSCI China vs. S&P 500 Indices, next 12 months MSCI China Technology vs. S&P 500 Technology subsectors, next 12 months
80% 150%
130%
60%
110%
40% 90%
70% +1 Std. dev.: 64%
20%
50%
30%
0%
+1 Std. dev.: -3% 10% Average: 20%
-20% Average: -22%
Equities
-10%
Jul. 2021: -7%
-30% -1 Std. dev.: -25%
-40%
-1 Std. dev.: -41% Jul. 2021: -50%
-34%
-60% -70%
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21
Source: MSCI, Standard & Poor’s, FactSet, J.P. Morgan Asset Management.
Guide to China. Data are as of July 31, 2021.
55China: Sector earnings and valuations GTC | 56
Earnings growth of MSCI China* MSCI China price-to-earnings
Earnings per share, year-over-year change, consensus estimates Forward P/E ratios
65% 60x
60% 2021 2022 Current
55%
15-year range
50%
50x 15-year average
45%
40%
35%
40x
30%
25%
20%
15% 30x
10%
5%
0% 20x
-5%
-10%
Tech.
Energy
Industrials
Financials
Materials
Utilities
MSCI China
Comm. Services
Health care
Real estate
Cons. Staples
Cons. Discr.
Equities
10x
0x
Sector
Weight 1.2 4.4 14.2 2.3 1.8 3.7 100.0 4.2 5.7 21.7 34.8 6.1
(%)
Source: FactSet, MSCI, J.P. Morgan Asset Management.
*Sector indices used are from the MSCI China Index. Consensus estimates used are calendar year estimates from FactSet. Past performance is not a reliable
indicator of current and future results. **Data for the forward price-to-earnings ratio in the real estate and health care sectors begin from 30/09/16 and 30/06/09,
respectively. 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.
Guide to China. Data are as of July 31, 2021.
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