China’s supply-side reforms are paying off
Reforms have the potential to make industries structurally sound for investors, rather than just short-term trade
David Millhouse writes for Bloomberg this week that China’s efforts to cut overcapacity have already shown positive results and have the potential to provide wide-ranging, long-term benefits:
“If implemented forcefully, it does have the potential to structurally improve the outlook for several cyclical industries, reduce pollution, and lower the risks of non-performing loans to the banking system.
Athough efforts to reduce overcapacity may bring short-term risks to the Chinese banks via higher short term nonperforming loans, the policy should structurally improve the demand-supply balance in several industries over the longer term, leading to higher utilization rates and improved profitability.”