Compared with first-generation entrepreneurs most of whom are industrialists, the second generation has global vision, a higher level of wealth management literacy and the ability to evaluate asset allocation plans. Moreover, they are generally more aggressive in investment strategy and devote considerable attention to ownership arrangement and wealth creation both for their businesses and themselves.
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We believe the negative view on China is politicized and biased, and the economic outlook of China could be more positive, with the Chinese economy acting again as the world economy “locomotive” after COVID-19 induced disruptions. China’s supremacy in manufacturing has transformed from being the “world factory” depending largely on low-cost production and craftmanship to an innovator in diverse technologies backed by a regiment of scholars and engineers after years of dedication to education and commitment to research and development.
U.S. dollar has showed strength against a basket of other currencies including the yuan since the Fed initiated the current interest rate hike cycle in March 2022 from near zero percent that is unrivaled for decades in terms of the scale and pace of the increases. In our view, the decline in yuan in recent months is transitory and the Chinese government has been taking steps to address the issue. The primary reason for the weakness in yuan is the interest rate disparity between the U.S. and China.
Some of the mineral sands companies have lowered their production guidance for FY 2023 or FY 2024 due to the following inevitable factors aside from demand issues. Supply constraints also arise from delay experienced by greenfield project and time required to ramp up output. In recent years, enormous efforts have been made to explore new end markets with higher value added for zircon and its derivatives in an array of areas.
According to a non-exhaustive search, there are more than 30,933 hedge funds and mutual funds based in OECD countries. Since diversification is one of the most critical factors in reducing investment risks, it is stunning to discover that 36% of those funds’ capital is concentrated solely on U.S. assets, while only 2.4% of the money is invested in assets in China.
Thus far, no health supplement specifically designated for fertility preservation has made to the top-20 bestseller list in China though a few pioneering products have already been marketed in the country. However, the phenomenon also indicates enormous business opportunities ahead for existing and forthcoming supplements.
Latest banking turmoil in the West and the exhaustive use of sanctions on Russia are pushing the Global South to look for alternative global payment systems for settlements in bilateral trade and other financial transactions. In January 2023, Brazil and Argentina announced that they were considering a common currency called ‘sur’ in Spanish (meaning south in English) for use in bilateral trade-related transactions within Latin America alongside their own sovereign currencies.
Based on our understanding from the 20th National Congress of the CPC and the 14th National People’s Congress along with the expectations of China’s ever improving competitive advantages, evolving market conditions and persistent policy enhancement, we believe the following sectors will stand out: Healthcare; Renewable Energy and Electric Vehicle; Defense; Financial Services.
Inflation risks are to the upside due to intensifying geopolitical tensions including the one between the U.S. and China together with uncertainty about abundant food supplies, as extreme weather stemming from climate change is anticipated to be more frequent, risking bumper harvests and stable food prices that could result in hyperinflation. All of the factors mentioned above would threaten the job market and slow economic growth, possibly leading to stagflation. Meanwhile, a severe recession could be avoided with China being the growth engine of the global economy.
Maternal (prenatal and postnatal) health supplements are part of health foods. Though a niche market, its growth potential cannot be underestimated in view of favorable measures like the three-child policy introduced in 2021. China’s new births dropped to 10.6 million in 2021, a decline of 11.5% compared to 2020. To incentivize higher fertility rate, the Chinese government has rolled out tax deductions, longer maternity leave, better medical insurance, and housing subsidies over the past year or so.
The COVID-19 pandemic has taken its toll on a lot of industries. Global GDP contracted 3.1% in 2020. Nonetheless, after our analysis, we believe that healthcare, productivity-enhanced technologies and manufacturing in China are among the industries to outperform amid the lingering pandemic, while travel and tourism will be the sectors rebounding strongly post-pandemic owing to pent-up demand.
As expected, prices of commodities in general and industrial metals in particular had been on a steep upward trajectory from around March 2020 to March 2022. Using the broad Bloomberg Commodity Index (“BCOM”) as a proxy, commodity prices surge about 75% during that approximately two-year period, with nickel being the outperformer, registering a gain of 163%..
Even though near-term outlook for the broader commodity market is muted, there are still bright spots, namely the versatile material zircon and the indispensable crude oil and natural gas. Zircon prices continued to trend higher even in 2Q 2022 and in the first three weeks of July. Although crude oil and natural gas prices did retreat, it happened later (in June 2022 rather than April 2022) and in a lesser degree.
Due to their unique and advantageous attributes, zircon and its derivatives have been increasingly used in a wide array of advanced applications in the high-tech field. For example, specialist zirconia ceramics are used for electronics such as in induction heaters, oxygen sensors and fuel cells, plus many other electronic components. Since zircon-based advanced materials are biocompatible, so they are often used for medical implants. Zirconium is also used in satellites as a reflective surface agent and in superconductive magnets.
While Australia is traditionally a major mineral sands producing and exporting country, along with South Africa, most of these top producers have experienced either flattish growth or even declines in terms of production volume in recent years. Conversely, some emerging, mineral-sands-resource-rich countries are encountering significant increases in output in the last few years. Indonesia, in particular, is becoming an increasingly popular destination when it comes to sourcing a stable supply of quality zircon for Chinese end users because of its ultra-high zircon assemblage and notable annual growth in zircon output.
U.S. CPI showed the similar pattern, recording 5.4% yoy increase in June 2021, the largest yoy growth since August 2008. Then it dipped to 5.3% yoy growth in August 2021. We believe that inflation will deteriorate before subsiding. Nonetheless, it is unlikely that we will enter a period of stagflation (with the mix of heightened inflation, high unemployment rate accompanied by tepid or negative economic growth) on the notion that the global economy will expand at a healthy clip amid recovering labor markets around the globe.
Zircon and titanium minerals are the two notable products taken from mineral sands deposits. Both of them have established multi-billion-dollar value chains with end products found in many goods that have become part of our everyday life as mentioned above. Among the components of heavy mineral sands, zircon has the highest market value, currently above US$1,300 a tonne. Hence, zircon along with naturally occurring titanium materials such as rutile and ilmenite are determinants of the economics of mineral sands mining.
In China, the market for assisted reproductive technology (“ART”) is both enormous and growing in view of the technology’s low penetration rate and the country’s high infertility. A nationwide reproductive health survey showed that China’s infertility rate rose from 12% in 2007 to 18% in 2020, meaning every 5.6 couples of childbearing age have difficulties giving birth to their babies. Meanwhile, the penetration rate of assisted reproductive services (“ARS”) in China was merely 7.1% in 2018, significantly lower than the 30.2% in the U.S. in the same year, indicating huge business opportunities for IVF providers in China.
China has set a target to become 70% self-sufficient in semiconductor production within a decade. Made in China 2025 calls for the country to have a dominant position in chip making by 2049. Besides that, China’s latest 14th Five-Year Plan (2021-2025), announced in March 2021, urges elevated spending on research and development by 7% annually for the next five years, with a focus on enhancing technological independence in semiconductor manufacturing and other emerging technologies.
Although cryptocurrencies have their merits, they possess several distinctively unfavorable attributes such as without sovereign backing, extraordinary price volatility and limited supply. Digital yuan is a digital currency electronic payment (DCEP) issued by China’s central bank, the People’s Bank of China (PBOC), a digital currency with the electronic payment function. Despite the fact that digital yuan is not yet a legal tender in China, it is anticipated that digital yuan would be the first digital currency to be rolled out by a major economy.
The trade war between the U.S. and China started in July 2018, when Donald Trump, the U.S. President at the time, followed through on months of threats to impose sweeping tariffs on a variety of China’s imports, accusing its unfair trade practices. In following months, the two countries had been embroiled in countless back-and-forth negotiations that resulted in nothing productive but tit-for-tat tariffs, the U.S. banning specific high-tech exports to China, and filing complaints from both sides with the World Trade Organization (“WTO”), all of which consequently leading to the escalation of U.S.-China trade tensions to the brink of a full-blown trade war.
The economy of China started the 21st century from a lower base, but grew at a much faster pace during its early years. China was one of the few countries avoided the severe impact from the global financial crisis in 2008 and the first nation around the globe restarted its business activities after lockdowns stemming from the COVID-19 pandemic. Total household wealth in China surged by more than 17-fold from US$3.7 trillion to US$78.08 trillion from the turn of the century till year-end 2019. In our view, China is definitely the wealth creation champion of the current century so far.
China aims to become a world leader in science and innovation by 2050. To accomplish this goal, the government has vowed to focus on achieving “major breakthroughs in core technologies,” including next-generation artificial intelligence (“AI”), integrated circuit (in particular semiconductors), cloud computing, quantum information science, medical device, brain science, and other key areas by establishing more national laboratories and innovation centers.
Orthopaedic devices in China constitute a vast market, and more than 80% of which is occupied by orthopaedic implant consumables. In 2018, the market size of orthopaedic implants served as medical consumables reached RMB26.2 billion, ranking second among high-value medical consumables. In contrast with the relatively modest growth rate witnessed around the world, the market size of orthopaedic implant consumables has maintained a steady but fast-paced growth in the past five years, with an annual growth rate of more than 16%, which is in the middle of the range of the medical consumable segment.
Recently, China further eased foreign access to its capital markets, with new measures such as combining the two major inbound investment schemes, namely Qualified Foreign Institutional Investor (“QFII”) and Renminbi Qualified Foreign Institutional Investor (“RQFII”), broadening the scope of investment permitted to foreign institutional investors, relaxation of foreign ownership limitations on Chinese financial institutions.
China’s presence in the global sports medicine market has been increasing in terms of size with estimated CAGR of about 19% between 2019 and 2023 despite it entered the field late on a relative basis. In 2018, the country’s market size was RMB2.1 billion (about US$313 million), with an annual growth rate of approximately 25%. It is forecast that the country’s market size will exceed RMB5 billion (around US$746 million) by 2023.
Digital yuan is also part of China’s long-desired goal to internationalize yuan and establish an alternative system, competing favorably with U.S. dollar in international trade settlements. China’s Cross-Border Interbank Payment System (“CIPS”) has the potential to replace the USD-dominated Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) system for settling international transactions in yuan.
Prices of commodities generally follow repeating cycles of ups and downs over time, and these cycles are a key feature more apparent to the mineral market. Price cycles for minerals are primarily driven by strength of their demand. A major boom in demand is often accompanied by a significant upward pressure on mineral prices. We believe an upcycle in mineral prices is poised to emerge post-COVID.
Geographically, North America and Europe were the two largest stem cell markets worldwide, accounting for a respective market share of 37.6% and 33.0% in 2018, while China made up 10.4% of the total global share. However, driven by more favorable policies, abundant funding and sustainable economic growth of the nation, China’s stem cell market is expected to reach US$56 billion in 2024, growing at a CAGR of 11.8% for the 2019 to 2024 period, higher than the pace of the global market. Importantly, China’s global market share is expected to jump to 28.6%, more than twofold of its share in 2018.
Rehabilitation is at various stages of development worldwide. The U.S. market is mature. The overall rehabilitation industry in Europe is well balanced and advanced. However, the same industry in China is still in its initial stage of development. China’s rehabilitation market can also be characterized as imbalanced with shortage of relevant talents amid massive growth prospects. China possesses the potential to trigger burgeoning demand for rehabilitation, as the country has 214 million seniors of which in excess of 40 million have lost the ability totally or in part to take care of themselves, more than 85 million disabled people, and above 50 million people with chronic diseases.
Although China’s healthcare industry, including the private sector, has displayed admirable development in many aspects in recent years, the country is lack of private hospitals and clinics focusing on sports and traumatology. Thus, these specialized medical institutions have ample room for high growth rates especially in view of the increasing popularity of a great variety of professional sports domestically and the Chinese government’s commitment to encouraging people to be physically active by building more venues for exercise and increasing allowances for private sports entities, especially those associated with basketball, football and volleyball.
Rising demand for medical services in China is driven by multiple factors, including a rapidly-aging population, changing of diets and lifestyles that are unhealthy, worsening air and water pollution, abolishment of the one-child policy, growing urban population, and increasing disposal income as well as health awareness. China formally laid out its vision for improving the country’s healthcare capabilities through the Healthy China 2030 Initiative. This unprecedented reform package includes commitments from over 20 government departments, outlining a blueprint to substantially upgrade China’s healthcare capabilities and catapult it as an international healthcare center for the world, with a focus on innovative drug and medical device research and development, improving medical service accessibility and affordability, and enhancing the country’s health awareness.
Due to their capability of analyzing voluminous data at incredible speed, supercomputers have played an expanding role in life sciences over the past 10 years or so, ranging from genomic research, drug discovery to helping physicians to make more accurate and speedy diagnosis and create personalized treatment plans that could minimize medical expenses by reducing unnecessary lab tests, and enhance patient experience.
We believe the overall healthcare industry in China will continue to be driven by several significant demographic, social and technological trends. Many factors contribute to the recent developments in the Chinese healthcare industry, and all of these are virtually guaranteed to continue for the foreseeable future.
The market for cancer therapies is enormous and market growth of cancer drugs and treatments is significant. Cancer is a broad category of human diseases characterized by a loss of control over the normal growth of human cells.
The potential for market growth of applications for regenerative tissue is significant. There have been tremendous technological advances recently in the methods for constructing tissue and scaffolds for the growth of tissue based on human cellular material intended for applications ranging from human heart valve repairs and reconstructions, vascular tissue repairs and replacements, to membrane replacement barriers for use in the treatment of traumatic brain injury.
Market growth of cancer drugs and treatments is significant. In the last 20 years, we have seen tremendous changes in lifestyle, including decreased physical activity and poor diet, leading to an epidemic in obesity.
Global nickel market is promising, supported by stainless steel demand. China is becoming a significant force in the global nickel consumption and stainless steel production market.
Coal is still the dominant source of energy for China, providing approximately 70% of the country’s total energy consumption.
Fundamental Understanding of Nanotechnology; Impact across Applications; Insights into Emerging Opportunities and Markets
Fundamental Understanding of Nanotechnology; Impact across Applications; Insights into Emerging Opportunities and Markets
This report contains an up-to-date overview of rare earth materials and their applications as well as the role of nanotechnology
in the rare earth market.