Reorienting trade

Trade tensions may be dominating the newscycle but China is shifting its trade model to high-growth markets of the future.

04 Feb 2019
  • Trade barriers dominate the newscycle going into 2019 but underlying changes in emerging markets point to a more open trade flows in the future;
  • China is pushing a free trade agenda to open new overseas markets in Asia, Africa and the Middle East to trade and investment;
  • Chinese companies are moving their operations overseas in concert with the roll-out of the Belt & Road strategy;
  • Their investments are concentrated in areas where the middle class is set to expand by 2.9 billion people by 2030.

While trade tensions dominate the newscycle, an important shift is happening in China’s trade model that shows China’s future may not lay in sending its goods to established, developed markets but by servicing the economies of the future.

Stepping up a free-trade agenda

That is because China has stepped up its trade agenda and signed free trade deals to give its companies access to overseas markets. China has concluded 17 global free-trade agreements (FTAs), negotiated another 14, and targeted another nine deals1.

Most notably, the Regional Comprehensive Economic Partnership is in the final stages. This deal establishes a free-trade bloc of 16 Asian countries, including China, India, Singapore, Indonesia, and Vietnam, at a time when the IMF projects the region will grow 6%+ annually in 2019 and 20202.

Ramping up overseas investment

And Chinese companies are positioning, investing USD 109.5 billion in 195 overseas greenfield projects during the past ten years3. At the same time, China’s Belt and Road initiative has ramped up and put an estimated USD 382.8 billion into new ports, rail links and road infrastructure at the end of 20174.

Recent greenfield investments and projected growth in middle class and populations by region

Source: American Enterprise Institute, November 2018 & Financial Times, April 2015

Positioning for future global growth

And Chinese companies’ overseas investments are highly strategic and targeted in global markets that are expected to see the largest growth in population and middle class over the next 12 years.

Long-term prospects look strong

Opening up new markets, establishing overseas capacity and linking with hard infrastructure, will reorient China’s trade model for the 21st Century, and that is an important consideration at a time when trade concerns dominate newsflow and adds further weight to our conviction that finding the right companies leading these trends will give investors long-term strategic positioning as China’s growth story continues.

More Emerging Markets and China articles


This website is intended for persons resident in Australia only and should not be relied upon by persons from any other jurisdiction. UBS Asset Management (Australia) Ltd ABN 31 003 146 290, AFS Licence No. 222605 is the product issuer of investment funds listed on this website. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation or needs. Any potential investor should consider the relevant product disclosure statement (PDS) in deciding whether to acquire, or continue to hold units in a fund. Please consult your financial adviser. Past performance is not a reliable indicator of future performance.

Offer not to persons outside Australia

The PDS does not constitute an offer or invitation in any jurisdiction other than in Australia. Applications from outside Australia will not be accepted through the PDS. The funds are not intended to be sold to US Persons as defined under Regulation S of the US federal securities laws.

Read more about our privacy policy and UBS AM Principles of Internal Governance and Asset Stewardship

© UBS 1998 - 2020. All rights reserved