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China's fintech sector provides "enormous" opportunities for investors

China's fintech sector provides

China's fintech enterprises still provide investors with "enormous" and "stunning" opportunities despite ongoing trade disputes and a slight slowdown in the economy.

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By Charles Bliss 19.07.2018

China’s fintech enterprises still provide investors with “enormous” and “stunning” opportunities despite ongoing trade disputes and a slight slowdown in the economy, according to Carlyle Group co-CEO Glenn Youngkin, who professed his “love” for the sector on Tuesday.

New data released by Chinese authorities earlier this week showed that China’s economy grew by 6.7% during the second quarter of 2018, which was short of the 6.8% uptick seen during the first three months of the year. This easing of growth has led to speculation about medium-term growth prospects amid escalating tensions on trade. 

Investors are concerned that the tariffs imposed on Chinese goods by the Trump administration could push economic growth down further during the final six months of the calendar year. The fact that China is the world’s second-largest economy means that any flux in GDP growth could have a negative impact on the global picture.

Despite these testing conditions, Youngkin said that China remains an excellent option for investors, especially in the area of fintech. He added: “We think it offers an enormous growth opportunity. The Chinese economy is growing; it’s growing at the fastest pace in the world; the Chinese consumer is growing faster than any consumer in the world, and any evolution of financial technology in that environment is actually stunning.”

Investment bank UBS said that there will be a check in growth momentum in China and that the ongoing trade war with the US is likely to have an impact on any growth in excess of 0.5 percentage points. The Swiss bank also changed its forecasts for Beijing, lowering growth expectations to 6.5% from 6.6% for 2018 and 6.2% from 6.4% for next year. 

While this suggests that growth will not be tracking upward for the foreseeable future, Youngkin believes that long-term prospects remain very favorable, and overall, China’s economy will continue to prosper and provide investors with ample opportunities despite the chance of more volatility. 

He added: “Despite the news overnight from Beijing, on expectations out of China, we felt that China was growing at a 5 or 7% for quite a while now. And so for them to say, ‘Well, we might not grow at 7 but we may grow at 6’, for an economy of that size, we think over the long-term is pretty darn impressive.

“We think the volatility in the markets in the near-term has clearly increased and will continue to increase, but over the long-term, we don’t see any near-term signs of recession.”

Youngkin also hopes that the trade conflict resolves in the coming months, as further announcements and threats by US President Donald Trump will make Chinese stocks even more vulnerable.

In other financial news, steel prices in China slumped for a second successive day on Tuesday as the ongoing trade conflict again took its toll. Data released earlier this week showing a slower pace of economic expansion has also fueled concerns and clouded the outlook for demand in construction steel.

“The mediocre macro-economic data added to poor market sentiment and weighed on steel prices for far-month contracts,” CITIC Futures analysts said in a note. Shanghai benchmark rebar futures saw a 1.7% contraction on Tuesday, dropping to the lowest figure for almost a week. 

Sport steel prices also eased, according to data released by Mysteel consultancy. “Chinese steel margins have pulled back slightly from decade-highs reached in June but remain anchored well above historical averages,” brokerage company Jefferies added. “With aggressive environmental controls likely to drive steel output restrictions, Chinese prices may soon be boosted by a further production drop.”

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