> Investors remain wary of China and broader emerging markets, and for good reason. The country faces a challenging 2025 - characterised by a managed economic slowdown, a real estate sector under immense strain, and escalating trade tensions. > > But if history is any guide, betting against China’s ability to manufacture growth has rarely been a winning strategy. ### What I'm thinking about: ### **1. Chinese Stocks Are Historically Cheap** The MSCI China Index is currently trading at a **52% discount** to the MSCI US, making it one of the cheapest major markets globally. While the discount could reflect fundamental concerns, history suggests that such extreme undervaluations often precede strong rebounds. ![[Screenshot 2025-03-18 at 18.07.11.png]] ### **2. Government Stimulus Works and it's Happening Again** Past periods of Chinese stimulus have triggered massive equity rallies. The **CSI 300 Index** soared **618% in the mid-2000s**, **200% post-2008**, and **157% after subsequent interventions**. With the **PBOC ramping up quantitative easing** and fiscal support increasing, the setup today resembles prior boom periods. ![[Screenshot 2025-03-18 at 18.07.00.png]] ### **3. Chinese Consumers Are Deleveraged & Cash-Rich** Unlike Western economies burdened by debt, Chinese households are sitting on **record levels of liquid deposits**. If confidence returns, even a modest deployment of this cash into consumption and investments could fuel a significant recovery. ![[Pasted image 20250320100420.png]] ### So What? The market has priced in a lot of the bad news, but volatility remains high. China’s ability to stimulate growth and drive technological leadership is intact, yet investors must be selective. Those willing to embrace the risk could be rewarded, just as they were in previous cycles. Whether China is **"cheap and attractive"** or just **"cheap for a reason"** will depend on how well it delivers on its next chapter of growth.