China: This Too Shall Pass
If history has taught us anything, it’s that nothing lasts forever—whether in life or the stock market.
And if history is any guide, when investors retreat from a market en masse, it almost always means there are opportunities, albeit selective, to be found.
When it comes to China, while its troubled real estate sector can't be overlooked, its clear intent to invest in and dominate the tech industry suggests a nation ready to pivot and adapt.
I recently spent a few weeks in the country hoping to get a better understanding of the whole situation and get a feel for the economy on the ground. The trip did not disappoint.
I started my trip from Shenzhen where I got a big warm welcome at a financial conference.
The next day we went to Shenzhen's bustling Hua Qiang Bei electronics district trying to get my research assistant’s MacBook Pro back to life. At an Apple store in Tokyo, they quoted US$850 and a two-week wait for the repair. However, in Hua Qiang Bei, we found a skilled young technician who had it up and running in just two hours, replacing both the hard drive and the logic board—all for a mere US$120. (This isn't a plug for third-party repairs, just sharing what we experienced on our trip!)
We also made a pit stop at a wonton shop for a quick bowl and got a behind-the-scenes peek at how these delicious wontons come to life.
From Shenzhen we took the high speed train to Yangjiang, a 2.5-hour trip at 300 KM per hour. Near the station were many high-rise developments with high vacancies, which contrasted the bustling old city, home to a lively mall and fantastic eateries.
Yangjiang, home to roughly 2 million people, is renowned for its knife manufacturing and as the site of China's biggest nuclear plant.
Car rentals in Yangjiang now come to your doorstep. Ours was ready and waiting at the railway station. We drove around town and then set off to Zhanjiang on a beautiful 8-lane highway. On the way we took a brief detour to the serene Jingye Temple.
Zhanjiang, with a population of 7 million, has a busy downtown. Yet, like many cities, its outskirts are dotted with vacant high-rises, many constructed by troubled property giants Evergrande and Country Garden.
In the old town we enjoyed freshly squeezed sugar cane juice and admired various statues depicting the early days.
We couldn't resist indulging in fantastic US$4 haircuts complete with head massages.
Finally we went bargain hunting for jewelry and coins. Found an American silver dollar and even a Kruggerand, for about US$5 each!
Next, we drove to the humongous ferry terminal, heading to Hainan Island with our car in tow. There was a sea of massage chairs so I treated myself to a 15-minute massage for US$1.50, conveniently paid with a quick Alipay QR scan.
The ferry trip to Hainan Island took 1.5 hours. I was amazed by the size and number of trucks coming off and going into the ship. Hainan sends fruits and vegetables to the mainland and receives manufactured goods in return.
China has gone whole hog for electric vehicles through a generous subsidy program. Each province has its unique scheme; in Shanghai, for instance, they subsidize RMB 15,000 on a RMB 60,000 cost. The manufacturers are also subsidized so there are about 200 manufacturers which produced 27 million EVs last year. However, some manufacturers exploit the system, recycling parts from subsidized vehicles. On our journey, we tried two EVs: Red Flag and Nio (whose stock dipped from $62 to $10/share), plus the petrol-fueled VolkwagenTiguan. All delivered sleek drives with impressive interiors and exteriors.
In Sanya, we marveled at the towering 108-meter three-faced Guanyin of South Mountain. Standing 15 meters taller than the Statue of Liberty, it's the world's largest Avalokitesvara statue, crafted from titanium alloy. The surrounding park is adorned with golden Buddhas in diverse forms: guardian warriors, ancient bells (which visitors can ring), and sacred bodha trees from India. Many come here to pray for good fortune—myself included! It's believed that touching the statue's toes brings luck. Additionally, the walls are inscribed with Buddhist scriptures.
Hotels in Sanya are impressive. All at surprisingly low prices! There is even an Atlantis with wonderful giant aquariums like those in their Dubai and Nassau outlets. At the Atlantis we enjoyed a dramatic acrobatic water show and a kiss from a friendly seal.
One thing that stood out to me during my visit was China's remarkable infrastructure development over the past few decades. Their high-speed railways, roads and ports rank among the world's finest, often surpassing what many other countries have to offer.
Meanwhile, I was struck by the sight of "ghost cities" filled with completed or half-finished buildings that stood empty. Clearly the real estate market is in deep trouble and is affecting the millions of people who have invested in property. Yet, it seems to me that the leadership's priority isn't on rescuing the property market. Rather, there's a palpable push towards establishing a top-tier tech industry, emphasizing sectors like semiconductors and advanced technologies. This shift suggests that while challenges persist, specific sectors could hold promising investment opportunities.