(Bloomberg) -- PGIM’s chief executive welcomed China’s latest stimulus efforts, but said the country needs to do more to rebalance the economy toward consumption.
Market sentiment around China has improved from six months ago, and in the past two weeks officials have shown “a sense of resolve” to manage structural issues, the asset manager’s CEO David Hunt said in a Bloomberg Television interview. But supporting the manufacturing and banking sectors might not be enough to achieve needed changes, he said on the sidelines of the SuperReturn Asia conference in Singapore.
“I would much prefer to see some real focus on the consumer, and making sure that there is more money in the pockets” to spend and invest, Hunt said. PGIM is the investment management business of Prudential Financial Inc. and oversees $1.3 trillion in assets.
The world’s second-largest economy recently unveiled a raft of measures to manage slowing growth and depressed investor confidence. Earlier this week, China’s central bank announced a broad package of monetary stimulus measures, including cutting a key short-term interest rate. Authorities are also considering injecting as much as $142 billion into the biggest state banks, Bloomberg News reported on Thursday.
China’s ability to reach its 5% economic growth target will depend on how structural reforms in the banking sector are implemented, Hunt said.
While President Xi Jinping has reiterated the need for officials to strive toward that goal, a number of Wall Street economists are predicting that China may miss the target, especially given the country’s prolonged real estate downturn.
“Our belief is that China will look more and more like other developed economies, and their growth rate will naturally come down and that is actually OK,” Hunt said. “The question is less the level of growth and more how it’s distributed between manufacturing and personal consumption and that is where we’d like to see a shift.”
Turning to other markets, Hunt said Japan is on the “right path” after a difficult 20 years, citing rising wages and corporate reforms. There are major opportunities around the aging population, such as senior living and healthcare, he said. Japan has also benefited from tensions between China and the US, he said, citing the opening of chip-manufacturing plants as an example.
--With assistance from Anand Menon.
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