1 Thing to Know About China’s Economy Now

China is currently the largest trading partner of both Singapore and ASEAN. It is also the second largest economy in the world. Given these, I think it may be useful for investors in Singapore to pay some attention to what’s going on in China.

Here’s an excerpt from a Wall Street Journal article that was published just five days ago touching on updates on important economic numbers from China:

“Industrial production grew 5.4% in January and February compared with a year earlier, down from December’s 5.9% pace, according to government data released Saturday, and just below the 5.6% forecast by economists polled by The Wall Street Journal. Meanwhile, retail sales clocked 10.2% growth in the two-month period, slower than December’s 11.1% increase.”

From the above, we can see that the performance of the Asian giant’s economy had come in weaker than expected, although there was still growth. It’s also worth noting that Chinese officials had estimated China’s economy to grow at a rate of between 6.5% and 7.0% in 2016; while those growth rates look healthy at first glance, the 6.9% expansion in China’s economy in 2015 was the slowest rate of growth seen in 25 years.

As investors in Singapore, how might we manage the risk of China’s economy slowing? Personally, I believe that the Chinese economy will continue to grow for many years in the future although the rate of increase will likely slow.

Thus, investing in companies such as Wilmar International Limited (SGX: F34) and BreadTalk Group Limited (SGX: 5DA) may allow investors to benefit from their exposure to the Chinese economy. In 2014, 45% of Wilmar’s total revenue was sourced from China, according to data from S&P Global Market Intelligence. In BreadTalk’s case, the same percentage was 31% in 2015.

Sticking with companies with little or no exposure could be another way to manage the risk of China’s economy slowing. There are big companies in Singapore’s stock market, such as Singapore Telecommunications Limited (SGX: Z74), that have little or no exposure to China.

There is no guarantee that companies with little or no Chinese exposure will not see their business suffer as a result of contagion when China catches an economic-cold. But, investors can be consoled by the fact that these companies have more layers of insulation against what’s happening in the middle kingdom.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.