Media
Contacts
Kathy Valentine
+1 (434) 227-2177
kathy.valentine@cfainstitute.org
Jessica Galehouse
+1 (434) 227-2178
jessica.galehouse@cfainstitute.org
Burton G. Malkiel at CFA Institute Annual Conference:
China to Be World’s Largest Economy in Next 20 Years
China was last in this position in 1820, when it
accounted for more than 30 percent of world GDP
Vancouver, BC, May 14, 2008 − Although China’s
growth rate will inevitably decline, it will continue to be the highest
in the developed world, according to Burton G. Malkiel, Chemical Bank
Chairman's Professor of Economics at Princeton University.
Malkiel, author of A Random Walk Down Wall Street, explored
China’s economic past, present, and future at the CFA Institute
61st Annual Conference here today. The conference, which
concluded today, brought together more than 1,800 investment
professionals from 70 countries and offered an unparalleled look at the
trends and investment issues critical to success in today’s global
marketplace.
In his presentation, Malkiel cautioned that China will face obstacles
along the way to becoming the world’s largest economy, including
political tensions with Taiwan and neighboring Japan, environmental
concerns, uneven income distribution, corruption, and a banking system
struggling with bad loans. He believes that China will continue to grow
economically, however, because of continuing opportunities for the
development and urbanization of the middle and western regions of the
country, its educated population, the government’s ongoing investments in
infrastructure, and a sense developing among the Chinese people that
economic progress is part of their heritage.
Investors who are eager to profit from China’s continued growth may find
it to be a complicated, risky market, Malkiel said. For instance, the
various types of Chinese equities available, some restricted to ownership
by Chinese citizens and institutions (“A” shares) and some designated for
international investors (“H” shares, which trade in Hong Kong, or “N”
shares, which trade in New York), create multiple markets for Chinese
equities. Without arbitrage opportunities among the various types of
shares, mispricing and extreme volatility can result.
Another concern for investors in China is the heavy involvement of the
Chinese government in share ownership, which creates governance issues
for other investors. To help reduce this risk, Malkiel advocated
combining a direct strategy with an indirect investment strategy for
investing in China. A direct strategy would involve the purchase of
equity shares of Chinese operating and real estate companies, and an
indirect strategy would involve purchasing positions in global operating
companies that are benefitting directly from China’s economic boom.
Malkiel concluded with a discussion of the case for investing in Chinese
real estate. He noted that China’s significant fundamental growth is
driving the need for substantial investment in infrastructure projects,
such as highways, airports, and high-speed railroads. In addition,
excellent opportunities are available in residential real estate in China
because the urban population is expected to grow from 40 percent of the
population today to 60 percent by the year 2020.
CFA Institute
CFA Institute is the global association for investment
professionals. It administers the CFA® and CIPM curriculum and
exam programs worldwide; publishes research; conducts professional
development programs; and sets voluntary, ethics-based professional and
performance-reporting standards for the investment industry. CFA
Institute has more than 95,000 members, who include the world’s 82,000
CFA charterholders, in 133 countries and territories, as well as 135
affiliated professional societies in 56 countries and territories. More
information may be found at www.cfainstitute.org. (Bloomberg users can find CFA
Institute at 497458Z).