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Chinese investor confidence rising amid deregulation, earnings growth, says Barings

Laura Luo, the bank’s head of Hong Kong, China equities, says while China’s economic growth is set to slow, the pace will be gradual, allowing time to handle local government debt problems and continue with supply-side reforms

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The headquarters of the People's Bank of China in Beijing. Earlier this month, the central bank’s governor Zhou Xiaochuan warned about financial risks, arguing that deepened reform and opening up are the priorities to proactively controlling such risks in China’s financial sector. Photo: Reuters

Foreign investors’ have been trimming their exposure to China’s banking and financial sector but that may change as confidence in the nation’s liberalisation and reform efforts is rising, amid corporate earnings growth this year, according to Laura Luo, head of Hong Kong, China equities at Barings.

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While China’s economic growth is set to slow, the pace will be gradual, Luo said, allowing time for the government to handle its local government debt problems and continue with its supply-side reforms– introduced in early 2016 with the aim of eradicating idle capacity in heavy industry.

Earlier this month, central bank governor Zhou Xiaochuan warned about financial risks, arguing that deepened reform and opening up are the priorities to proactively controlling such risks in China’s financial sector.

Laura Luo, head of Hong Kong China equities at Barings. Photo: SCMP HANDOUT
Laura Luo, head of Hong Kong China equities at Barings. Photo: SCMP HANDOUT

“People were previously very sceptical that China’s reforms would actually yield results,” Luo said. “But the quality of China’s growth has indeed improved while concerns toward the banking system have eased somewhat.”

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China’s decision last week to allow foreign firms to take controlling stakes in domestic financial joint ventures, including banks, securities, asset managers, and insurers, comes after a string of overseas institutions sold stakes to local partners in Chinese banks, securities and mutual funds, because of policy opacity and cutthroat competition.

People were previously very sceptical that China’s reforms would actually yield results. But the quality of China’s growth has indeed improved while concerns towards the banking system have eased somewhat
Laura Luo, head of Hong Kong China equities at Barings
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