The goat is the eighth of twelve symbols in the Chinese zodiac. It’s sometimes referred to as the sheep or ram.
The Chinese regard goats as an auspicious animal, and the Year of the Goat, therefore, is thought to herald a year of promise and prosperity.
I was born during the Year of the Goat in 1979, so have to agree with this sentiment.
I received an interesting email from Jupiter Asset Management today, describing what the Year of the Goat might mean for Chinese investments.
The email included the quote by Chinese philosopher and poet Lao Tzu used in the image for this post; “If you do not change direction, you may end up where you are heading.”
Before moving on to examine the views about Chinese investment markets in the briefing note from Jupiter, it’s worth pondering that quote for a moment from a Financial Planning perspective.
Is your current direction taking you towards where you want to be heading? Will you be satisfied if you end up where you are heading, if you don’t change direction?
New Silk Road
Jupiter explained in their briefing note for investment advisers that the Year of the Goat is likely to herald a major push by China to establish a new ‘Silk Road’. This is the adoption of a new five-year plan to boost social and economic development in China, along with a pick-up in the pace of financial reform.
According to Ross Teverson and Charles Sunnucks of the Jupiter Global Emerging Markets team, this new ‘Silk Road’ formed part of the Communist Party’s Third Plenum policy, which makes it an official national strategy.
They key aim of this plan is to break the connectivity bottleneck, improving communication and trade between China and its neighbours through better infrastructure, more cooperation between institutions and fostering cultural exchanges.
China is likely to play the role of the ‘one-stop shop’, with the supply of funding (putting their large foreign exchange reserves to work), expertise and equipment for new regional projects.
This is China’s 13th five-year plan, placing an emphasis on rebalancing the Chinese economy. According to Teverson and Sunnucks, it is likely to create an economic growth target of 6.5% a year for the next five years; they believe this is high enough to support development but low enough to give policy makers the room they need to implement reforms.
Growth at 6.5% is however a meaningful deceleration from the 7.4% achieved in 2014, which itself was a 24-year low. Despite this, the Jupiter team believe China can continue to present compelling investment opportunities with the right stock selection.
As we celebrate the Chinese New Year and the Year of the Goat, it will be interesting to see how this five-year plan is implemented in practice and what impact it has on returns from the global emerging markets sector in the future.