China Set for Soft Landing: Fund Manager

The Chinese government is engineering a softer landing for the world’s second-largest economy, a fund manager specializing in Asia told CNBC Wednesday.

Great Wall of China photo composite
Great Wall of China

“I believe Chinese inflation will peak in the near term,” said Joshua Crabb, Fund Manager at BlackRock.

“The market gets fixated on lowest rates, but China is a bit different. The reality is it’s good to have the correction in the property sector. We have seen what happens when bubbles get out of control," he said. “A correction is probably healthy and something the market can deal with.”

“If you look at the correction we have had in the last couple of years, relative to what we had in the last 20 years, it suggests that it will get better as markets realize the economy is getting better,” he added.

Concerns were raised over Chinese inflation Tuesday after it hit its highest level in nearly three years in May. The consumer price index rose to 5.5 percent in May, up from 5.3 percent in April, as food prices continued to shoot up. This was the highest rate since July 2008, when the index rose to 6.3 percent, and far above the government’s target of 4 percent.

This could lead to more government measures to control inflation in China, which recently overtook Japan as the world’s second-largest economy.

Outside of Japan, probably the region’s most developed economy, Asia Pacific equities have been weak, falling 2.29 percent in May.

Crabb believes that some of the Chinese banking stocks are good picks at the moment.

“Chinese banks have been quite solid,” he said.

“The level of debt that’s in China is quite simply lower, so you don’t have massive over-leverage as you do in other countries," he said. “Hong Kong property developers have been around for a longer period of time. They have much stronger balance sheets than the rest of China, but fewer growth opportunities.”