Bin Shi (BS): Overall the impact is quite limited, but it can be bad for some individual companies caught up in the sanctions.
That said, we have seen that the void caused by sanctions on one company has, in many cases, been filled by others.
The positive side is that there has never been so much focus from Chinese companies on developing their own technologies to reduce their reliance on the US. We believe that means some Chinese companies may pick up the slack caused by the sanctions, and that may open opportunities for us.
BS: China is definitely in the lead with 5G. For example, one piece of research shows that 40%^ of all handsets in China are 5G-ready. That said, for 5G to see wider deployment and user adoption, we will need to see a 'killer-app' developed. There are some candidates, such as Augmented & Virtual Reality and the Internet of Things, but we will keep our eyes focused in this area.
It is possible that the roll-out will be delayed, but our base case remains that a decoupling between the US and China is unlikely and China will develop its 5G applications over time.
GP: In the short-run, a Biden win might be positive for EM and China risk assets. That said, there's strong, bi-partisan support for tough policies against China in the US.
Looking longer-term, it may be possible that a Biden presidency would be even tougher on China than the current administration. The reason being that Biden would probably pursue a more consensus-driven, multilateral approach to confronting China, which would be markedly different, and potentially more challenging for China, than the unilateral approach being taken by the Trump administration.
BS: We have been focused on 'new economy' for the last ten years.
We will continue to do so, ROEs for 'new economy' stocks continue to be stronger than those for other sector areas and we expect they will continue to benefit from long-term secular trends, like the offline-to-online shift and increasing consumer demand.
BS: We remain positive on the health care sector. We see that it has a huge market, where demand hasn't been impacted by the US-China tensions. In other areas, Chinese companies are quickly catching up to leading global companies in terms of technology and innovation. So in the long-run, we think it is possible that some of the largest companies in the China health care sector emerging as global players too.
HB: If you look globally, default rates in the US are around 10%^, approximately 5%^ in Asia, but we believe the default rates are closer to 2%-3%^ in China.
A lot of that has to do with the Chinese government, which has the ability - via policy banks - to lend directly and efficiently into sectors undergoing stress, and that is markedly different to say the US and Europe.
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Head of Fixed Income, Asia-Pacific
Portfolio Manager, Investment Solutions