What's going on?
Chinese manufacturing returned to growth in March after three straight months of contraction, data on Monday showed – buoying investor confidence and pushing the nation’s stocks to a one-year high.
What does this mean?
It looks like China’s efforts to fertilize growth with tax cuts, infrastructure spending, and relaxed bank lending rules are allowing the world’s second-largest economy to bloom. They may be helping neighboring beds, too – there were also slight improvements in manufacturing data from Japan and South Korea on Monday.
Asia is doing the heavy lifting of the global economy at the moment. In the US, yet more Monday data showed retail sales falling (although manufacturing picked up), while in Europe, German factory output shrank by the most in nearly seven years last month. Government bonds in both countries are flashing recession warnings (tweet this).
Why should I care?
For you personally: Mao money Mao problems.
Wherever you are, the chances of your pension or portfolio including Chinese investments is increasing as the plum blossom economy opens up to the world. Investment index provider MSCI said recently that it would add more mainland Chinese stocks to its flagship emerging markets benchmark. Bloomberg, another index provider, this week began adding billions of dollars of Chinese government and government-linked bonds to a popular group of investments. “Passive” investors in funds which simply track the performance of such indices benefit from low fees – but in return sacrifice control over where their money’s flowing.
The bigger picture: Trade jaw, not trade war.
A fresh round of US-China trade talks kicks off in Washington this week – and as long as the pair keep talking in an attempt to resolve their differences, investors are likely to remain relatively upbeat. Both sides have been working on the text of a trade agreement that could perhaps be signed off as soon as this month. Perhaps…