China‘s Economic Stabilization and Investment Opportunities

Following a recent trip in May 2025, naomi Waistll, co-manager of Emerging Carmignac Portfolio, believes China is stabilizing, but cautions against growing imbalances.From an investment perspective, microeconomic factors should be prioritized over macroeconomic trends, leading to increased stock selection opportunities and greater uncertainty regarding market beta performance.

The Chinese Puzzle

the atmosphere in China is more positive than during our visit in september 2024.The political announcements made in late May signaled a crucial shift, acknowledging the unsustainability of the current economic situation weighed down by deflation. However, what was initially presented as a commitment to “do everything” has evolved into a need to “do more.” This creates a disconnect between short-term expectations from industry and the market, and the reactive reality of policymaking in the world’s second-largest economy. Many companies and market participants anticipate a new wave of large-scale stimulus measures, contrasting wiht ministerial statements emphasizing the need to assess the impact of existing policies before considering additional steps. A key issue is the gap between policy introduction and market implementation. Local governments often act as bottlenecks, constrained by their debt and limited capacity to fully support a recovery. The resolution of this issue remains uncertain.china’s outlook is more long-term, with society demonstrating greater tolerance for periods of difficulty. Years of strong growth were fueled by a booming real estate market, which bolstered confidence in living standards, wealth, and future growth. A resurgence of this positive cycle is not yet visible. The situation coudl worsen before improving in the second half of the year,as initial demand may gradually slow exports as it is absorbed. in a context where investment already represents a disproportionate share of GDP and foreign trade is affected, further increasing investment is not only more challenging to implement but could also come at the expense of essential factors like productivity declines or rising public debt.

A Two-Speed Economy

Consequently, a two-speed economy appears to be emerging. While exports and manufacturing continue to support the economy, the real estate market remains stagnant and a