Exports performed better than expected during the first quarter of 2023, led by the electric vehicles (EVs), solar panels and battery segments. For export sectors, the recovery will probably not be as strong, but it is not expected to collapse.The recovery process will likely come in phases and depend on factors such as the property market, which has performed patchily across different cities in China. While China’s economy experienced a strong bounce in the fourth quarter of 2022, its recovery so far this year has not been as strong as anticipated.We continue to focus on industry-leading, high quality companies that we believe will be successful in the long term. While most are waiting for a catalyst to possibly return to Chinese equities, valuations are low and any positive development can ignite the market. Global investors overall have an underweight position in China this year.Not only are they adapting to the various external challenges in this volatile environment, they continue to invest in technology, invest in research and development (R&D), control costs and grow their business. Strong competitiveness from Chinese corporations is giving us confidence to stay invested for the long term.However, sanctions particularly on semiconductors could have a detrimental downstream impact on technology companies, even if there is no immediate dent on economic growth numbers. Geopolitical tension between China and the US is a concern, but an economic decoupling is not likely at this stage as the two countries are highly dependent on each other.

A firm and consistent direction from the government will do more to restore business sentiment and encourage investment. Markets are expecting more concrete supportive measures from the government, but we think it is more important that measures are clear and can be interpreted and implemented without ambiguity.However, sales for big-ticket items such as automobiles as well as property purchases are still below expectations as it takes time to restore confidence levels after COVID. Economic activities are bouncing back on strong pent-up demand, as evidenced by retail spending and travels during the Golden Week holiday.

Pent up cash