China: The World’s Best Consumer Story

Aug. 12, 2017 12:08 a.m. ET

As Earth’s second-largest economy, China accounts for more global growth than the U.S., Europe, and Japan combined. Yet it’s also a source of endless investor apprehension, as economic growth has slowed from double digits to about 6.5% and its communist government works hard to steer China toward capitalistic consumption.

With more than half of its 1.4 billion citizens already living in urban areas, the biggest boost from urbanization is largely behind it. Yet Andy Rothman, Matthews Asia’s strategist, continues to expect big things from China’s consumers.

Rothman, 58, has watched China transform its economy over three decades—first in the U.S. Foreign Service, as head of macroeconomics in the U.S. embassy in Beijing, and then as CLSA’s China strategist. In 2014, he joined Matthews, which manages more than $30 billion invested in Asia. Recently, in a phone interview with Barron’sfrom his San Francisco office, he spoke about China’s economic prospects, Beijing’s coming leadership reshuffle this fall, and its trade tensions with the Trump administration. As a macro strategist, he declined to name stock picks.

Barron’s: The People’s Bank of China has raised benchmark interest rates to a two-year high. What should we expect?

Rothman: Beijing is engaged in what I call de-risking. Right now, the Chinese government sees a period of quite healthy economic growth, and this gives it an opportunity to tackle some of the more serious problems in its financial system.

For example, there are concerns about the proliferation of wealth management products, so the government has progressively tightened the standards for these. The growth rate has come down, and today, only 16% of these are risky, hedge fund–like products, down from 21% in 2014.

You see some determination not to let risks go unchecked and develop into a crisis. For instance, regulators are cracking…

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