The 18th Asian Financial Forum opened on January 13 in Hong Kong and lasted for two days, attracting global financial leaders who discussed, among many topics, the current global challenges, the outlook for 2025 and, of course, China’s place in the global economy.

In a global economy beset with geopolitical tensions and uncertainties around various national elections – and the world’s second-largest economy facing economic headwinds – investors, and stakeholders in general, have been encouraged to explore new opportunities for fostering cooperation and growth.

In doing so, Antoine Gosset-Grainville, chairman of the board of directors at AXA, speaking during the Global Economic Outlook panel discussion lays out four issues that are particularly important to consider: “The first is the orientation of US economic policy. It is too early to forecast whether there will be a new phase of the trade war. The second is consumption in China. The third is Europe’s structural burdens, including high energy prices and less innovative regulation. The last issue is geopolitical volatility.”

However, amid all the uncertainties, Gosset-Grainville emphasizes: “Large companies should prioritize risk management above all else.”

Consumers, tech advances

China is facing several challenges, including a real estate crisis, heavy local government debt, sluggish consumer spending and increased geopolitical tensions. The country’s economy is experiencing mild deflation, with the overall price level falling for six consecutive quarters by an average of 0.8%. Consumer prices rose by just 0.3% in the year to September, according to Fitch Ratings, and 40% of the items in the consumer price basket are declining annually.

“China is down at this point, but not out,” explains, Fred Hu, founder and chairman at Primavera Capital Group, speaking during the panel discussion. “I want to highlight three fundamental strengths of the Chinese economy: the power of consumers, the power of artificial intelligence ( AI ) and the energy transition.”

Encouragingly, China still has a significant middle class and household balance sheets remain strong. Once consumers regain confidence or develop a more positive outlook on their incomes, Hu suggests, they are expected to increase spending.

“In addition, with the popularity of ChatGPT, AI has come into the spotlight,” he adds. “After the US, China is projected to become the next big market for AI. In particular, China’s manufacturing industry is well-positioned to adopt automation technologies, including intelligent robots, to increase efficiency.”

Energy transition

China is a global leader in energy transition, especially in renewable energy, electric vehicles ( EVs ) and batteries. In 2023, about 60% of the world’s EVs, according to the International Energy Agency, were sold in China, demonstrating its commitment to green and sustainable development.

Despite scepticism from some voices in the US, reducing carbon emissions and achieving net-zero goals remain widely recognized priorities across Asia. These efforts have created numerous investment opportunities and diversified financial tools in the field.

In 2023, China Asset Management Company ( ChinaAMC ) launched one of the first green energy real estate investment trust ( Reits ), which are now traded on the Shanghai and Shenzhen stock exchanges. “China is one of the largest infrastructure markets globally,” notes panellists Li Yimei, ChinaAMC’s CEO. “The Reit market has grown rapidly in China over the past few years, and it will play a vital role as a financing platform.

Vibrant carbon trading markets, which facilitate the buying and selling of carbon credits, are viewed by panellists as being key to advancing the energy transition. However, since most were only established a few years ago, they faces scalability challenges.

“Many exchanges and even private entities in Asia own carbon credit exchanges, but none have achieved the scale needed to generate enough trades,” notes panellist Bonnie Y. Chan, Hong Kong Exchanges and Clearing’s CEO. “At the moment, carbon credits are still seen as something people purchase to offset emissions rather than as an asset class for financial players to trade. Therefore, I hope to establish a pan-Asia carbon credit market to achieve scale and generate stronger momentum.”

Hong Kong link

Hong Kong continues to leverage its unique position as a bridge between global markets and mainland China, Chan stresses, attracting both foreign and mainland investments.

“Mainland investors play a significant role in Hong Kong’s markets through the Southbound Connect programme,” Chan explains. “Typically, they account for 15% of the average daily turnover ( ADT ). On the day with the highest ADT at HKEX in 2024, HK$600 billion was traded. Mainland investors accounted for 40% [of that total], trading HK$280 billion.”

Panellist Charles Li, Micro Connect’s founder and chairman, highlights the growing influence of Chinese capital. “We must recognize that in the next 30 years, there will be a shift from primarily international capital to primarily Chinese capital. That shift is already taking place – not because international capital is leaving, but because Chinese capital is rising.”