Quora Answer: Should Investors Worry about the Chinese Economic Bubble?

The following is my answer to a Quora question: “Should investors be worried about the Chinese economic bubble bursting given the current economic situation in China?” 

Institutional investors are involved in China long-term, and have no such concerns.  Speculators, who are looking to make money in the short-term, are in for a roof ride.  Most investors are exposed to China via funds and exchanges.  Some have equity in Chinese companies listed outside China.  It is highly unlikely for retail investors to have direct interest in the Chinese market unless they are invested directly in China. 

China is still the manufacturer of the world.  It is the second largest economy, and it projected to eventually overtake the United States as the largest, within the next several decades.  China is not slowing down.  China has over a billion people, which means its domestic market alone is more massive than most countries’ population.  That level of consumer leverage grants China clout in international trade deals. 

What we are having is a shift in consumer behaviour due to the pandemic.  A post-pandemic economy actually benefits China since there is greater emphasis on online retail, which benefits their manufacturers.  China is coping with pent up demand as global economies open.  Our greatest concern at the moment is not a recession, but inflation.  While we expect periodic corrections, the long-term growth over an extended investment horizon is still bullish.