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China's economic growth is slowing after decades of rampant increases. Photo: EPA

China share market yet to hit its peak, says Lenovo founder Liu Chuanzhi

Lenovo founder believes shares will continue to prosper on the back of government push for people to turn their savings into investments

Lenovo

China's stock market, which turned four dismal years on their head last summer to embark on a skyward trajectory, has not hit its peak despite all the talk of a bubble and the likelihood of continued turbulence, according to one of the country's most respected entrepreneurs.

The bourse would continue to prosper as the central government was encouraging people to shift their deposits from savings accounts at local banks to private investments, said Liu Chuanzhi, chairman of Legend Holdings, and the founder of Lenovo, the world's top PC maker.
He made his comments in an interview with the before the benchmark Shanghai index sank more than 7 per cent last Friday. "There will always be ups and downs," he said. "But in the long run, I believe the Chinese stock market will continue to rise, because the transfer [of people's savings to capital] will continue."
Liu Chuanzhi said China's new leadership was changing tack to let people make their own investment choices in previously forbidden areas. Photo: May Tse
The Beijing-based Legend, envied for its diversified portfolio with Lenovo as its prize, will list in Hong Kong today after raising about US$2 billion from its initial public offering.

Liu said China's new leadership, led by President Xi Jinping and Premier Li Keqiang , was changing tack to let people make their own investment choices in previously forbidden areas.

There will always be ups and downs. But in the long run, [the market] will continue to rise
LIU CHUANZHI

"The government is now trying all means to get people to spend or invest, including letting them put their money in capital markets," Liu, who founded Lenovo in 1984, said.

"Previously, it was always government-led investments [in China]. But now Beijing has different ideas. The government wants the private sector and individual investors to take more of a leading role.

"When you invest your own money, of course you will take your investments more seriously, so the chance to get a higher return also climbs."

China's economic growth is slowing after decades of rampant increases. This has caused some hair tugging and spurred fears that the model it has been relying on so far may have run out of gas.

Government-led infrastructure projects and other investments have created waves of jobs and led to the creation of new airports, roads and bridges across the country, but it does not seem to be working for the Chinese economy anymore.

Under the leadership of Xi's predecessor Hu Jintao and former premier Wen Jiabao, Beijing was known to readily sign off on lavish infrastructure deals. This was especially true at local government level, as officials were keen to boost growth targets, even if it meant borrowing heavily.

In late 2008, after successfully hosting the first Olympic Games to be held in China, Beijing announced a landmark economic stimulus package worth 4 trillion yuan (HK$4.99 trillion). The Hu-Wen government also expanded loan issuances by 10 trillion yuan.

Leading economists, including Wu Jinglian , have publicly raised concerns about the side effects of such government-led investments. Some fear it could create asset bubbles in the property sector; others fret about just how sustainable such investments are.

One hurdle to the new push is that China is a land of money savers. Deposits equivalent to US$21 trillion sit in savings accounts across the country, according to central bank data.

The major worry is that, unless the public is persuaded to spend or invest some of their savings, the economy will continue running out of steam.

READ MORE: Top 5 tips for Chinese entrepreneurs from Lenovo's Liu Chuanzhi

To insulate itself and spur economic growth, China is trying to make itself less reliant on external trade by promoting domestic consumption of homemade products and services, as it switches from a manufacturing to a consuming nation.

"It's not appropriate for the government to always play a leading role in investment," said Liu. "It should do more to encourage the private sector to take the reins."

This growing trend was already being reflected in the Chinese stock market, he added.

The Shanghai bourse, one of two on the mainland, has risen about 30 per cent this year, making it one of the world's best performing stock markets.

The other, in Shenzhen, has fared even better, up almost 79 per cent.

In light of the recent corrections, the days when the Shanghai stock exchange looked like an exploding rocket may be behind it, but it would still go up, Liu said.

This article appeared in the South China Morning Post print edition as: Mainland market 'yet to hit its peak'
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