Citibank Taiwan Ltd (台灣花旗) yesterday downplayed concerns about China’s diminishing consumption amid the country’s slowing economic growth.
“Recent closures of local businesses and China-based operations by Taiwanese companies are isolated cases of mismanagement, and growth in the consumer market remains intact,” Citibank Taiwan wealth management group senior vice president Spencer Wang (王進彰) told a media briefing.
He was referring to the demise of Yih-Dah Co Ltd (儀大), a Tainan-based children’s apparel brand operator that dissolved its business on Tuesday after incurring heavy losses from its Shanghai-based subsidiary.
China’s GDP growth will inevitably decline this year, but the bulk of the decline is from exports and imports, rather than domestic consumption, Wang said.
“I do not wish to see Beijing attempt to pad exports by implementing large-scale bailout packages and other policies that are aimed at sustaining China’s reliance on exports,” Wang said.
“Such moves would represent a backwards step in transitioning into a consumption-driven economy,” he added.
Business closure is a normal occurrence in a market economy and not a cause for concern like bank failures, Wang said, adding that he has not detected significant weakness in China’s banks, apart from the shuttering of a few smaller state-run regional banks.
Wang also played down concerns about corporate bond defaults in China, saying that companies can still offer equities in lieu of debt repayment.
Beijing still has immense capital to tap into, if it decides to quicken the pace of privatization of its state-run enterprises, he said.
International bidders will likely pay a five-fold premium for stakes in China’s state-run enterprises, he added.
Meanwhile, Wang advised investors to take shelter in high-yield bonds amid heightening upheaval in the global markets, as the instrument has a high correlation with its value.
A Citibank index tracking high-yield bonds has posted a 17.97 percent rebound between February and this month, with the figure rising 0.89 percent higher than last year’s peak on May 29.
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