China: No Longer a ‘No-Brainer,’ But Still the Best of Emerging Markets

“Some of the demonstrations and unhappiness is what comes along with economies maturing,” says Eastspring’s Andrew Cormie.

Illustration by II

Illustration by II

For many global investors, China is no longer a no-brainer investment choice after the government imposed a series of draconian Covid policies and cracked down on the technology, real estate, and online education industries in the past few years. But for $222 billion asset manager Eastspring, the most promising investment opportunities across all emerging markets are still in China.

“We screen the whole [EM] universe [to search for] companies we think are cheap, and it happens that they are in China,” Andrew Cormie, who leads Eastspring’s global emerging markets team, told II in an interview. Eastspring believes the most attractively priced companies are in the renewables, hospitality, and smart infrastructure sectors, according to its 2023 outlook. Cormie uses a bottom-up investment strategy, which focuses on analyzing individual stocks instead of big economic factors, such as inflation and interest rates.

Global investors’ sentiment towards the country has become more divided since the Chinese authorities started regulating some of the industries that fueled China’s GDP growth in the past two decades, most notably real estate and technology. Last year, the country’s strict Covid quarantine rules caused a wave of unprecedented protests, which added to investors’ concern over China’s economic growth. Top investment managers, such as Capital Group, J.P. Morgan Asset Management, and BlackRock, have already started searching for growth opportunities outside China.

But to bullish investors like Eastspring there are still abundant investment opportunities in the country. “Some of the demonstrations and unhappiness is what comes along with economies maturing,” Cormie said. “We think it’s part of the natural progression in China.”

Besides, it’s not easy to find better alternatives in emerging markets. Take India, for example.

The Indian population will soon become bigger and skew younger than the Chinese population. “But today, the capital markets [in India] are very domestically driven. Many of the stocks in the market look expensively priced. So this is sort of a frustrating tradeoff between this very attractive long-term story [and] the short-term unattractive pricing of company,” Cormie said.


Like many other EM specialists, Eastspring also has an EM ex-China strategy because Chinese companies represent such a large portion of EM indices, edging out other markets. According to Cormie, some investors prefer the ex-China strategy. “But in our experience, that’s the minority rather than the majority,” he said. Most investors put money in the ex-China strategy because they want to be exposed to a more diversified basket of EM stocks, he added.

“Our biggest overweight is China, and that’s where we are seeing the best opportunities in emerging markets today,” Cormie said.