China, Thomas, Secretary discussed on Monocle 24: The Bulletin with UBS

Automatic TRANSCRIPT

Back to the UBS wealth management CIO report co authors, Thomas goods, and Sondra Vida and Thomas, I wanted to ask you a little bit about the property sector compared to others. People often suggested I know in the report you make this point that it's the most important secretary in the Chinese economy because there are so many different stakeholders who were exposed to it. Perhaps you can tell us a bit about why that's the case and how that works. We have in China as you know, from the bureau of year five years, some gold that six regarding increase in wells increase in welfare, but also regarding economic rose. So the this goal down to the local governments onto the cities, and they all have to try to match the gold has said the bullet bureau. And so many local governments and TD's scoring into real estate is easy way at which the goals that are set by the central government and also. Degrees, a big sinking and believe regarding the Chinese population that real estate prices are going to grow forever. So you take the local governments, CDs, and investment preference of the Chinese. And so they all agreed they should do more for real estate because they sing, they will become richer doing that. So this is a big differentiation between China and all advanced economy the where we made the companies and to better understand why real estate is so important for China. Just finally on this, although this may not be part of the base case, what would a big property downturn? I mean, presumably that would be very serious. China. We would be quite severe even if that's not the part of the base case. Maybe you can just tell us why that would be so damaging. And I guess as a secondary point to that, which other countries would be affected by that, presumably those who export to China, correct. There's a huge dependencies from the t. p. two or a high exposure to real estate sector in China. For example, private households. They have a lot of wealth, invested in real estate, also local governments, or depending on revenues. They get from lawn land, sales and property revenue. And then of course, we have all that. Other sectors which are in the supply chain, like raw materials or machinery, and all these will get harm. If there is a halt in construction or if there would be a downturn, and we would expect that the TD p of China will get slower. And also, of course, would have an impact on countries exporting to China because China is a huge purchaser of commodities. So all the countries that export to China, this hour, especially commodity linked, emerging market countries would get harmed. If the demand from China is lower and also prizes commodities with decline, and that would lead to a distribution of wealth from the commodity producers. Who the consumer and Finally, I must just ask, what does all this main for investors? We always like to get a sense of that paps Thomas. I can put that question team. Yeah, I think that's the most important implication of the peace for us and for clients because we have this view that we deliver in this report regarding the macro picture, but most importantly is what we should advise to our client. Even in a worst case scenario where would have a correction in the market. And here I think we would like our customers and prospects to understand that now because China is transforming more and more and more yours for Europe that also invested have to change their mind and to share the preference regarding a Howdy invest. How diversified, especially between deposit be an and between the only quid investments now are available in China because you know that investment markets from the equity side and also from the. Bon side of change extremely in the last years. That means for clients with vise them to gradually diminish the investment to real estate and to increase the investment in liquid assets. And most importantly is the focus has to be changed from capitol price increase to income generating investment vehicles. And I think that's the key for coming years. And if the almost invest do that in China, I think that would be also great help for China to increase the overall efficiency of the economy if than just invest of focus on the best companies. The well management, the well-managed grammar, right and divide, particularly take your their money and put them on in the sectors of the Konami dot are the most competitive. And that's very good bringing us to the end.

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