Photo: Feng Li/Getty Images
Much has been made about how Chinese companies have been losing their global competitive edge due to rising labour costs and a shrinking workforce.However, Credit Suisse strategist Mujtaba Rana argues that it’s still too early for other companies to lower their guards.
From his note to clients today:
There are six reasons why we are still concerned about the competitive threat presented by Chinese corporates to remain in certain sectors: (1) slower domestic growth (we expect 7.7% this year down from 9.2% last year), (2) excess capacity in China (investment to GDP at 46% last year has meant rapid capacity growth), (3) momentum in the trade numbers, (4) an undervalued exchange rate (35% undervalued on PPP measures), (5) a focus on growth rather than profitability, and thus a lower operating margin structure (6) government targets within the 12th 5-year plan that target the development of certain industries.
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