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U.S.-China tensions could ‘supercharge’ China’s innovation: JPMorgan


An worker works on the production line of semiconductor wafer at a factory of Jiangsu Azure Corporation Cuoda Group. China has stepped up investment into its chip industry in a bid to be self-reliant in crucial technology needed for electric vehicles, smartphones and more.

VCG | Visual China Group | Getty Images

U.S.-China tensions have pushed Beijing to be more self-sufficient, and that may very well be a superb thing for innovators in China, in response to an investment specialist at JPMorgan Asset Management.

“Certainly one of the unintended consequences of this push and shove between the U.S. and China is that it has just underscored this determination in China to change into self-sufficient in an entire number of industries,” Alexander Treves told CNBC’s “Street Signs Asia” on Thursday.

Within the mid-Nineties, Chinese corporations were mostly mass market manufacturers of “commoditized goods,” he added.

“Now, you have real tech innovators,” he said. “I feel that the geopolitical tension you are talking about will just actually supercharge that — because China must do these items itself, and they’ll carry on with progress in that area.”

China has stepped up investment into its local chip industry in a bid to be self-reliant with regards to crucial technology for various products — from electric vehicles to mobile phones. But it surely still relies heavily on foreign technology.

Treves said investors should search for corporations that may succeed regardless of geopolitical tensions.

“Geopolitics are here to remain, so get used to it, just accept that,” he told CNBC.

JPMorgan bullish on China tech

JPMorgan has been investing in Chinse tech corporations this 12 months, the investment specialist said.

A number of the firms have “world-leading business models” and an enormous addressable market, while valuations are higher than they was once, he added.

Moreover, profitability has improved because corporations are spending less and being less aggressive against one another — partly due to the regulations, Treves said.

“We have been adding to the Chinese web corporations this 12 months for precisely that reason,” he said.

Individually, in the electrical vehicle space in China, Treves said JPMorgan looks for corporations with essentially the most pricing power — often the battery makers relatively than specific auto brands.

“Then you definately need not make a bet on which brand will succeed, on … whether someone might be buying this brand or that brand,” he said.

One other fund manager, Edmund Harriss, is head of Asian and emerging market investments at Guinness Asset Management, can be optimistic about China’s EV sector, CNBC Pro reported.

He named two stocks to play the EV boom, and said corporations in the electrical vehicle sector, factory automation, and sustainable energy field would likely outperform their global peers over the subsequent five to twenty years.

— CNBC’s Arjun Kharpal contributed to this report.

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