While the growth story is not over for mainland China, or indeed Chinese equities overall, whether they are listed on the mainland or on the Hong Kong index, there are persistent concerns.
One of the biggest issues is the level of political interference in the economy and in the companies making up the A-Shares index, and the way in which policy can have significant effects on both the domestic and international markets.
For example, two years ago, as sister newspaper Investment Adviser has commented recently, the country devalued the yuan in a surprise move, a shockwave that was felt globally, leading to Black Monday 2015.
The volatility index (Vix) went into hyperdrive, the Dow Jones index shed 588 points and the FTSE 100 lost £74bn in a day’s trading.
Since then, the country embarked on significant fiscal stimulus programmes, attempting to reflate the economy and are now trying to rein it back in.
But the problem, as Arif Husain, head of international fixed income at T Rowe Price, explains, is the heavy-handed manner in which economic measures are used.
“The cause for concern is that China is applying the brakes again. Of particular concern is the fact, based on past evidence, that the country tends not to calibrate its economic measures.
“When it touches the brake, it tends to flatten it.”
He points to the fact the People’s Bank of China (PBoC) has raised short-term interest rates three times this year already, and between March and April, the China Banking Regulatory Commission released not one but seven documents revealing tighter financial regulations.
“In addition,” says Mr Husain, ‘some 55 Chinese cities have introduced 160 cooling measures to curb rising house prices. If we accept the world’s recent growth spurt can be traced back to China’s 2016 stimulus package, it should follow that we need to be concerned now the stimulus is being taken away.”
Damn lies and statistics
Analysts Fathom claim to have been “sceptical” of official Chinese GDP statistics, and believe that while the government is doubling down on its strategy of investment and export-led growth, this growth path is “unsustainable” over the medium term.
In a July analysis piece from Fathom, writer Jess Baker comments: “There is strong reason to believe Chinese GDP statistics are less than fully reliable.
“For one, quarterly Chinese GDP statistics are released suspiciously early, three weeks after quarter-end, compared to four weeks in the US, UK and euro area and seven weeks in Japan.
"Given that China is a developing economy, which is much larger than the UK and Japan, one would expect its GDP to be more challenging to calculate.”
However, as the chart below shows, absolute revisions to the first official estimate of GDP growth have been remarkably low in recent years (much lower than in the UK or Japan), and estimates have come in suspiciously close to target, Fathom believes.
