China’s A shares usually perform well ahead of the annual Two Sessions, not to mention that recent economic figures are also quite promising.
The nation’s foreign trade turned out to be better than expected despite pressure on the Chinese yuan.
China’s imports rose 7.9 percent in January while exports jumped 16.7 percent in the same period from the year before.
The trade surplus reached US$51.35 billion last month, far above that of December. These figures have demonstrated the resilience of China’s broad economy.
Historical data shows that A shares do well in the month preceding the Two Sessions.
The Shanghai Composite Index rose 15 times during the period over past 17 years while the Shenzhen market reported gains 14 times out of the total.
However, we usually see some profit-taking and the market falls back when the Two Sessions start.
Interestingly, the market often picks up again after a slight correction.
In this year’s Two Sessions, agricultural, mixed-ownership and supply-side reforms are likely to be the main themes.
China will focus on “supply-side structural reform in agriculture” to improve efficiency and quality this year, according to the “No. 1 central document” released by the central government this year.
The core idea of supply-side reform in the agricultural sector is to increase the output of high-quality products based on green and innovative production, shifting from reliance on resource consumption as in the past to green and sustainable development and focus more on quality over quantity in the future.
The document calls for innovation and “green” production, cultivating new growth engines, extending the sector’s industrial and value chain and enhancing rural reform.
In the future, we might see more activities in rural e-commerce, recreational farming and rural tourism, too.
I believe the authorities will unveil supportive measures on land provision, financing, talent development and infrastructure in the future.
This article appeared in the Hong Kong Economic Journal on Feb. 11
Translation by Julie Zhu
[Chinese version 中文版]
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