Structural growth themes in China - manufacturing upgrades

Sharukh Malik
One of the structural growth themes we target in China is manufacturing upgrades. This captures China's move up the value chain where Chinese companies are contributing to more of the value add across various industries.  

In the 1990s, a typical Chinese company was essentially a contract manufacturer with little to no input into the design of products. Today, more Chinese companies own the intellectual property themselves, allowing them to both design and make goods for use domestically and abroad.  

In terms of giving exposure to China's manufacturing upgrades, one company we like is Shenzhen Inovance Technology. It makes industrial automation equipment and is therefore involved in factory automation, electric vehicles and urbanisation. Inovance has been taking market share from foreign firms in China as the quality of its products has improved. It has also benefited from the import substitution trend, where China is reducing its reliance on imported products. 

Inovance has a good track record of identifying new areas of growth and expanding profitably while using its capital efficiently, it's yet another reason why we think investors should have a more positive sentiment towards China for the long run.