According to a report by Fidelity International, since China reopened after the pandemic in 2023, market sentiment has consistently remained at a low level. With suppressed consumer demand such as shopping and experiential services gradually being released, the Chinese economy continues to normalize and rebalance. Service consumption will become the main driving force Fidelity International's Asia economic analyst, Liu Peigan, stated that in terms of consumption, Fidelity expects the proportion of service consumption to increase, different from the old economic model driven by goods consumption. The recovery of the tourism and service industries has been a highlight in recent quarters. As the low base effect fades, this year's economic growth may normalize, but consumption, especially service consumption, is expected to become one of the main driving forces of China's economic growth in the coming years. For example, Macau's gaming industry has seen a strong recovery in 2023, with gross gaming revenue recovering to nearly 19 billion Macau patacas in December, not far from the pre-pandemic level of 23 billion Macau patacas. Stable growth in fixed asset investment, stimulus policies driving import recovery Regarding investment, Fidelity International believes that the growth in fixed asset investment is moderate and stable, with manufacturing and real estate investments showing contrasting trends. Manufacturing investment remains strong, while real estate investment is significantly weak. China has shifted its focus from urbanization investment to more efficient utilization of existing infrastructure. In the early 2000s, urbanization investment focused on real estate and infrastructure construction, including the construction of residential buildings, logistics centers, highways, railways, and bridges. Now, the new focus of economic development is on promoting the upgrading of manufacturing and the construction of "new" infrastructure such as 5G networks, electric vehicle charging facilities, and innovation centers. As China's economy enters the next phase of development, new forms of investment will promote more sustainable economic growth, enabling more families to enter the middle to high-income brackets. In terms of trade, the pandemic has caused a structural shift, with Chinese exports facing headwinds from weak global demand. As China surpasses Germany, Japan, South Korea, and the United States to become the largest exporter of automobiles, this reflects changes in the value chain. At the same time, stimulus economic policies supporting domestic demand improvements are also driving a mild recovery in imports. Turning to nurturing new economic growth engines, promoting long-term positive growth In July 2023, the Political Bureau meeting initiated a series of policies that are worth paying attention to, and these policies have been continuously implemented in recent months. Fidelity expects that China's policy support for the economy will gradually strengthen in the Year of the Dragon. The Third Plenary Session and the Two Sessions held this year may announce a clearer policy roadmap to maintain economic growth momentum. Liu Peigan added that as China's economy transitions, the Chinese government has shifted towards nurturing new economic growth engines, focusing on green investments, high-end manufacturing, and digital economy. It is expected that more resources will be invested in related industries to promote long-term positive economic growth and offset some short-term structural headwinds. For example, the Chinese government has pledged to comprehensively promote the construction of a beautiful China through a series of policies, including reducing pollution through a low-carbon development model and laying the groundwork for achieving long-term carbon neutrality goals. The Chinese electric vehicle market is one of the beneficiaries, with China committing to electric vehicles accounting for 45% of new car purchases by 2027 and introducing corresponding measures to support the transformation of the automotive market. Under consistent policy support, in addition to green investment, trade will also benefit, with China's electric vehicle exports reaching a peak in 2023, multiplying after the economic reopening. Introducing measures to support the silver economy, bringing huge growth opportunities In terms of consumption, the Chinese consumer market is also in a period of transition, bringing new opportunities for investors. It is expected that by around 2025, China's population aged 60 or older will reach nearly 300 million, accounting for over 20% of the total population. To address the issue of an aging population, the Chinese government has introduced measures to support the silver economy, including improving infrastructure, healthcare services, and social welfare for the elderly, bringing huge growth opportunities for the economy. It is expected that by 2030, the consumption scale of China's silver generation will reach 19 trillion yuan, equivalent to 28% of overall consumption and 9.6% of GDP. As the Chinese economy gradually recovers, Fidelity expects wage growth to increase as business confidence strengthens. Before the Chinese government issues further economic development guidelines, investors in the Chinese market need to pay attention to market trends in the short term and maintain flexibility. However, the numerous favorable factors for long-term investment in the Chinese market should not be overlooked.