China released first-quarter GDP numbers of 6.8%, very impressive for the world’s second-largest economy. Strong domestic consumption, accounting for almost 80% of GDP. Remember before, the GDP growth numbers were government initiated projects, now the strong consumer enables strong economic growth.The economic targets set for this year is a GDP growth of 6.5%, inflation of 3% and new job creation of 11 mn. Adjustments in the personal income tax with cuts will enable continued strong mass consumption.

A big event took place in March where the parliament reelected President Xi Jinping but also removed the term limits which means President Xi can stay indefinitely. The trade-war news is on-going and a large scale trade war is still unlikely for the time being. For now, our China Fund holds 42% cash given the uncertainty presented. Should a full-scale trade war take place, it could lower China’s GDP with as much as 1.8%. We follow the rhetoric closely.

China’s mantra of ‘Made in China 2025’ an initiative to move the country’s industry up the value chain, i.e. high tech, pharma industry, internet of things etc is well on its way.China’s R&D spending has increased fivefold since 2005 and China now have almost ¼ of the global artificial intelligence start-ups. Given its focus on clean and green technology, China now boasts a 40% global share of the electric vehicles market.

Domicile: Malta, Source: Bloomberg, UBS, Reuters

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