The Chinese economy managed to overcome the pandemic crisis rapidly and to record strong recovery rates both for 2020 and mainly for what we are expected to see in 2021.

However, the effort to get out of the pandemic, led to a sharp increase in bank lending, construction activity and the power of technology companies. This led the Chinese authorities to impose measures to prevent the gigantism of companies that in the future could pose a systemic risk and to derail the five-year plan that has already been put in force.

In the first quarter of 2021, there was a significant decline in bank lending and other forms of financing such as corporate bonds, in an effort to deleverage the economy and avoid bubbles.

The Chinese authorities have tightened the criteria for lending to construction companies, while at the same time measures have been taken to streamline banking institutions and manage the large debts owed by companies in various sectors, with priority to the construction sector.

Despite a deleverage effort, we do not expect PBoC to change its monetary policy as the authorities consider that there is no risk of maintaining a low interest rate strategy as long as interventions are made for greater transparency and sound management. of liquidity.

Luxury companies see high growth potential

With boosting domestic consumption a top priority to support overall economic growth, the Chinese have reopened their wallets after the pandemic and are rushing to buy luxury goods. Giant companies have skyrocketed their online advertising campaigns with the result that in the first quarter of 2021 alone, luxury goods sales have risen by 41%.

The S&P Global Luxury Index is moving strongly upwards, having risen 154% from the lows of March 2020, while only in the last six months, it has recorded a rise of 38.9% compared to 19.7% for the S&P 500.