This time last year worries about China's slowing growth and rising debt burden plunged global stock markets into the doldrums. The Chinese economy is still growing, but at 6.7 per cent in 2016 - the slowest rate since 1990. And US President Donald Trump has threatened to impose 45 per cent tariffs on imports from China and denounce it as a currency manipulator.
Jason Hollands, managing director of Tilney Bestinvest, has been cautious on the Chinese market for several years. "I would be extremely wary of investing in China, as deep cracks are appearing in its economic model," he says. "While China is often perceived as a country that has retained a Communist political system but effectively embraced capitalism, the latter is merely a cosmetic veneer. Chinese authorities are prone to intervening in economic activity and boards of listed companies are stuffed with state appointees, usually with the state as the dominant shareholder. Chinese economic growth statistics - often cited by bulls - need to be handled with care. There are widespread doubts about the efficacy of the data and, in any case, much of the headline growth is in uninvestible areas, and the result of the Chinese state dragooning companies and banks into inefficient investment."
The country's aluminium production is an example of the Chinese state chasing a higher growth rate, he argues. "While aluminium prices have crashed in recent years, China has just ploughed on vastly expanding its production capacity. In a true, free market economy the opposite would happen, but China is probably having to do this because it needs cash flow just to service interest costs on debt and sustain 'growth' figures."