Greg Stanton, the manager of the China Special Fund at Fidelity, has analyzed the economic situation in China, which faces challenges such as weak consumption, a downturn in the housing market, and a decline in business investment. Despite the negative factors in the Chinese economy, Stanton has also pointed out some strengths.
Strengths of the Chinese Market
Stanton stated: "In terms of domestic business, the conditions are relatively calm, but there are always strengths in certain areas." He mentioned some companies in his fund that are performing well, such as operators of luxury shopping centers and restaurant chains. According to him, while consumer spending is relatively weak, companies with a suitable business model are increasing their market share.
Potential of AI in China
Artificial intelligence (AI) is considered an attractive field for this region. Stanton added: "Companies specifically related to AI technology are experiencing a technology boom. Business for these companies is strong." AI is emerging as a major growth area for the global economy, and there are also concerns about the level of investment costs and return on investment in China.
Stanton also noted the market's negative reaction to increased investment costs by large technology companies like Alibaba and Tencent, adding: "This reaction seems a bit excessive." He said investors should pay attention to these companies' track records in generating returns.
Stanton is confident about the good potential of the AI market in China, stating: "Some of the big tech names fall into this category. They have been sold off, but if you look at the businesses as a sum of their parts - like cloud services - we are currently witnessing rapid growth."
Although the models produced by US-based companies are currently global leaders in AI, Stanton believes that Chinese models also offer significant competition. He referred to large language models (LLMs) that have performed successfully in China and said: "China has some of the most competitive LLMs, but the market does not seem to value them highly."
