2023 Prospect

1. Challenges and Opportunities China is facing nowadays

• Currency issuance maintains high volume and velocity. Risk-free interest rates keep declining to a lower level in the long term.
• All kinds of assets circulating within the financial system and trading markets are facing shortage of supply, which severely lags behind the volume and velocity of currency issuance. Asset securitization in a broad scope is an inevitable trend.
• Existing currency issuance by credit expansion facing several drawbacks, including imprecise stimulation, response lag, massive sunk cost, potential debt risks and etc. Its propelling effect upon the economic growth is continuously wearing off.
• China-US competition has escalated into a comprehensive war in terms of trade, technology, geopolitical influence, and capital/economy. This has led to a decoupling of high-tech industry between China and Western countries, especially US.
• China still has the largest consumer and industry market around the world, with huge demand.
• RMB will be extensively used among countries as the settlement currency of transactions, as “RMB internationalization”.

2. The characteristics of China and Chinese people

• China still has the largest workforce in terms of either skilled worker or educated employees.
• Chinese people tend to be self-sufficient in all kinds of industry categories, due to the philosophy cultivated through thousand-years of agrarian society.
• A common desire among Chinese people to pursue a better life through diligent work.
• People estimate that there is 7 millions population with a monthly income lower than $300.

3. China’s path in response to the situation

• Proactively develop high-tech industries achieving self-sufficiency.
• Low-carbon development patterns, more sustainable energy supply and environment-friendly technology will be broadly adapted and encouraged.
• Vigorously develop under-developed regions.
• Persist in anti-corruption and pursue high-level society governance and economic efficiency.

4. Private Equity investment in China will continue to develop and will see new peaks

• Over the past 20 years, Private Equity investment in China has extensively developed and the market rules and regulations have been gradually improving.
• The entire industry has survived through shocks and impacts for several times and still manifests vigorous vitality driven by rigid demands and ample rewards.
• Private Equity investment has been proved as one of the pillars within China’s credit-dominant system in currency issuance and corporate financing.
• Facing the rapid development of the high-tech industries, Private Equity investment has been playing a more prominent role, including solving the shortage of capital, taking on higher investment risk, providing more mature corporate management experience and industry resources, etc.

4. Investment Opportunities in China

• Technology industry: high-end manufacturing, pan-semiconductor industry, etc.
• Sustainable energy and low-carbon industry: clean energy, power system, electric equipment, new energy vehicles, energy storage, etc.
• Industrial digitalization: digital transition in software sector and finance sector, and related IT services, etc.