A prosperous

New China
Amid economic transformation toward a New China, The tertiary sector share in GDP surpassed the secondary in 2012 and the gap is widening
consumption and service-oriented sectors will be Share in overall GDP by industry
important drivers in the decades to come. Old China Share in overall nominal GDP Secondary industry

has not disappeared, but is focusing on innovation 55%

Tertiary industry
Tertiary industry excl. financials
and shifting toward a sustainable growth model. 50% 50%

45%
Hyde Chen, CFA, Analyst 42%
Chief Investment Office Wealth Management 40% 41%

35%

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Structural shift favors services and
consumption
China's slowdown is as much about
structural problems inherent in its old
growth model as it is about an economy in
transition toward a new normal. The growth
drivers have changed: we see consumption
and services expanding, while investment
and manufacturing assume a lesser role,
although the composition of the latter two
is also changing. Investors need to pay
close attention to three driving forces:
First, consumption and services are
gaining structural importance in China.
Sectors such as healthcare, insurance,
tourism, internet, sports and entertainment
are emerging against a slowdown in broader
economic growth to take center stage and
provide new investment opportunities.
From Made in China to Innovated Recent developments
in China
Second, while the prospects for Old
China have softened, the country is
transitioning from an economy that absorbs
and replicates global ideas to one at the
forefront of innovation. We believe select
R&D leaders in high-end manufacturing
could make significant breakthroughs in the
next few years, with the goal of achieving
global prominence.
A more sustainable energy mix toward
non-fossil fuels
Third, rising awareness of environmental
protection is also prompting the government
to transform its energy policy, relying on
Dec-15
Source: Wind, UBS, as at March 16, 2016
nuclear and renewable sources in its shift broad, diversified and low cost
toward non-fossil fuels. We thus see way to participate in China's new
opportunities in areas such as environmental growth drivers.
protection and alternative energy.
At a glance
The Chinese government recently Amid the economic transformation
announced an important policy on toward a New China, consumption
renewable power which sets hard targets. and service-oriented sectors will be
By 2030, 20% of Chinese energy will come important drivers in decades to come.
from non-fossil fuels, namely nuclear, hydro, Old China has not disappeared, but is
wind and solar. In this years National focusing on innovation and shifts toward
Peoples Congress, the government also set a more sustainable growth model.
an R&D as % GDP target of 2.5% by 2020, Investors can participate in Chinas
implying a CAGR of more than 10% over economic transformation via select
the next five years. stocks offering exposure to New
China with high growth potential while
S&P recently announced the New China still trading at an attractive valuation.
Sectors Index, which gives investors a
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