Reorienting trade

08 Jan 2019
  • Trade barriers dominate the newscycle going into 2019 but underlying changes in emerging markets point to 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 for the future, 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 inmiddle class and populations by region


Region


Region

Total new greenfield investment projects,
2008-2017

Total new greenfield investment projects,
2008-2017

Middle class growth,
2015-2030 (Millions)

Middle class growth,
2015-2030 (Millions)

Demographic growth,
2015-2030 (Millions)

Demographic growth,
2015-2030 (Millions)


Region

Asia-Pacific

Total new greenfield investment projects,
2008-2017

252

Middle class growth,
2015-2030 (Millions)

2,703

Demographic growth,
2015-2030 (Millions)

425.3


Region

Sub-Saharan Africa

Total new greenfield investment projects,
2008-2017

64

Middle class growth,
2015-2030 (Millions)

75

Demographic growth,
2015-2030 (Millions)

449.1


Region

North America

Total new greenfield investment projects,
2008-2017

62

Middle class growth,
2015-2030 (Millions)

-16

Demographic growth,
2015-2030 (Millions)

39.4


Region

South America

Total new greenfield investment projects,
2008-2017

32

Middle class growth,
2015-2030 (Millions)

132

Demographic growth,
2015-2030 (Millions)

136.8


Region

Europe

Total new greenfield investment projects,
2008-2017

27

Middle class growth,
2015-2030 (Millions)

16

Demographic growth,
2015-2030 (Millions)

-1.4


Region

Middle East and North Africa

Total new greenfield investment projects,
2008-2017

16

Middle class growth,
2015-2030 (Millions)

129

Demographic growth,
2015-2030 (Millions)

135

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.

UBS Asset Management in the United States

The website contains general information about UBS Asset Management (Americas), Inc., UBS Hedge Fund Solutions LLC, and UBS O'Connor LLC, collectively known as "UBS Asset Management". The information contained on this website does not constitute investment advice or a recommendation to purchase or sell any securities or other financial instrument or any particular strategy or fund. Market commentary, product information and related performance data available on this website has been compiled from sources believed to be reliable and is provided in good faith for informational purposes only. UBS Asset Management does not guarantee the accuracy, suitability or completeness of information contained on this website, and all such information, including but not limited to performance data and related metrics, is subject to change without notice. Certain content on this website is intended for institutional investors and their financial representatives only, and should not be relied upon by retail investors or members of the general public.

Market commentary and similar statements contained herein are based on current expectations and may be considered “forward-looking statements.” Actual future results, however, may prove to be different from expectations. The opinions expressed are a reflection of UBS Asset Management’s best judgment at the time of posting, and any obligation to update or alter any forward-looking statement as a result of new information, future events, or otherwise is disclaimed.

Investments involve risks, are not guaranteed and may not return the original principal amount invested. Past performance is no guarantee of future results. Investors should read all available product information carefully before making an investment decision, including information about applicable risks, fees and expenses. This website does not address the investment objectives, risk tolerance or financial needs of any particular investor. In addition, any statements regarding investment performance expectations, risk and/or return targets do not constitute a representation or warranty that such expectations or targets will be achieved.

This website is not intended for persons located in any jurisdiction where the availability of this website is prohibited or contrary to local law or regulation or would subject any UBS entity to any registration or licensing requirement in any such jurisdiction.

Please confirm you are a US resident to proceed.

Confirmation
Please select at least 1 checkbox