Careers Contact Us Global Our firm Insights Capabilities Press centre SEARCH Active is: Expanding the boundaries of investing Nine themes for investing in China’s transformation 08/11/2021 Summary As China’s economy quickly transforms itself, a thematic approach based on structural macro trends is an effective way to identify the winners. Key takeaways China is transforming into a high-tech leader, developing semiconductors, solar panels, artificial intelligence technology, biotechnology and dynamic new business models But only a small segment of companies will be “winners” – which is why investors may want to turn to a thematic approach as an effective way to participate in change We’ve defined a set of themes – including environmental commitment, healthcare transformation and food security – to help identify companies best positioned to profit from the country’s rapid transformation The following article is a summary of insights from our 2021 Asia Conference. LEARN MORE ABOUT INVESTING IN CHINA Only ten years ago, China had a reputation as the “workshop of the world” – a country where goods were not only mass-produced, but intellectual property was disregarded and products were copied. It was far from being the pioneering marketplace that it is now. In fact, China today leads the development of semiconductors, solar panels, artificial intelligence technology, biotechnology and dynamic new business models. At Allianz Global Investors’ June 2021 Asia Conference, one of the key topics was how China’s high-tech transformation has unfolded. Head of Thematic Equity Andreas Fruschki, Portfolio Manager Shibo Wang and Director of Research Terence Law explained how China has changed fundamentally. Patent filings within the country are outpacing those in North America by three to one. In terms of research and development investment, China ranks second in the world, just behind the US. In truth, China is transforming far faster than anywhere else in the world. Macroeconomic trends across several dimensions define its rapid evolution: strong economic growth, decarbonisation, urbanisation, technology innovation, deep industrialisation, increasing disposable income and demographic change. Taken together, these trends mean that China is likely to be as different 10 years from now as it was in 2010. The winning themes Just as at any time of rapid structural change, however, there are winners and losers. “Only a small segment of companies will be winners from China’s growth themes,” noted Mr Fruschki. “That is what you can identify with a thematic approach to investing. It’s a very effective way to participate in change.” Drilling down into China’s broad macro trends, Allianz Global Investors has defined a set of themes to help identify those companies best positioned to profit from the country’s rapid transformation. The current list of themes includes: Import substitution New consumption Environmental commitment Digital life Healthcare transformation Frontier technology Quality education Financial inclusion Food security Import substitution, the environment and consumption The first three themes in particular illustrate the emerging investment opportunities. For instance, “import substitution” describes the growing number of Chinese companies that are catching up with foreign competitors and taking market share. On a recent research trip, Mr Wang visited several companies along the semiconductor value chain, which are developing fast due to growing demand for chips. “The good news is that today it’s not just computers that need semiconductor chips, but also TVs, cleaning robots and the whole development of the internet of things,” he noted. “This offers a great opportunity for young Chinese semiconductor companies to finance their R&D spending.” Turning to new consumption, the pandemic’s aftermath is disproportionately favouring high-end Chinese brands instead of the old European favourites. “People are spending their money on high-end Chinese brands,” said Mr Wang. “Some of these companies are growing very fast, especially if they have innovative business models.” Another major theme is environmental commitment. In 2020, President Xi Jinping pledged that China would become carbon-neutral by 2060. Chinese businesses are already leading the global transition. China has the world’s largest market for electric vehicles, by far the biggest lithium-ion battery manufacturing capacity and the largest usage of polysilicon for solar panels. “We believe that the journey to carbon neutrality will result in significant winners and losers,” explained Mr Wang. Like other countries throughout history, China is undergoing an economic revolution that will enrich the architects of change. What makes today’s China different, however, is the sheer pace of reinvention. The investor’s challenge is to identify the winners – a task that can be simplified by focusing on the country’s growth themes. Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Equities have tended to be volatile, and do not offer a fixed rate of return. Emerging markets may be more volatile, less liquid, less transparent, and subject to less oversight, and values may fluctuate with currency exchange rates. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities. In mainland China, it is used only as supporting material to the offshore investment products offered by commercial banks under the Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of his document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional/professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP (Australian Registered Body Number 160 464 200) is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws. This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the U.S. Securities and Exchange Commission; Allianz Global Investors Distributors LLC, distributor registered with FINRA, is affiliated with Allianz Global Investors U.S. LLC; Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424, Member of Japan Investment Advisers Association and Investment Trust Association, Japan]; and Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan. 1747483 Want to view more? China insights Using AI to discover Asia’s environmental leaders DISCOVER MORE 4 days ago China insights Why China’s 2060 net-zero carbon goal matters today DISCOVER MORE 07/10/2021 China insights China’s Phase 3: a new chapter in its epic story DISCOVER MORE by Virginie Maisonneuve | 15/09/2021 Growth. The China Way. Using AI to discover Asia’s environmental leaders 4 days ago Summary The breadth, timeliness and consistency of artificial intelligence make it a powerful tool for identifying changes in environmental performance. Key takeaways AllianzGI has developed an AI “machine” that can unearth shifts in environmental performance far more quickly and accurately than ESG ratings agencies, which depend on human analysts The tool analyses the news flow from 12,000 sources, covering the companies and countries behind 35,000 to 40,000 assets Asset managers with technology that can gather insights ahead of the market can seek an advantage when incorporating environmental factors into investment decisions LOAD MORE Active is: Allianz Global Investors Value. Shared. Our firm Career What we do Our history Our culture Inclusion & diversity Corporate responsibility Our experts Our leadership team Our offices Insights Allianz Global Investors Academy Outlook & commentary The Investment Intelligence Podcast A new investment era Growth. The China Way. Don't downsize your dreams Capabilities Alternatives Equity Fixed Income Multi Asset Sustainable Investing Development Finance Research risklab Press centre Allianz Global Investors is comprised of the AllianzGI Affiliated Entities worldwide. Product availability will vary by jurisdiction. Credits Privacy Principles Terms Of Use Ariba Network Sitemap © Allianz Global Investors GmbH 2021. All Rights Reserved. With cookies, we are able to provide a user-friendly, safe and effective website. To activate the usage of all cookies on this website, please Accept Cookies below or use the Cookies Settings Tool to select which you'd like to allow. You can withdraw your consent at any time using this tool. For more information, please read our Data Protection Policy ACCEPT ALL COOKIES Cookies Settings