A US-headquartered investment house with a strong Asia focus says China’s recently announced reform package should give a large boost to the world’s second largest economy.

A US-headquartered investment house with a strong Asia focus says China’s recently announced reform package should give a large boost to the world’s second largest economy, echoing the broadly favourable views of the changes seen from other wealth managers.

Robert Horrocks, chief investment officer at Matthews Asia, said the proposed 60 changes set out by recently by the ruling Communist Party “reveals a strong determination by the government to carry out meaningful reforms”. (His firm oversees more than $26.2 billion of assets under management.)

His comments chime with those of UBS and Coutts, for example, which have recently given favourable views on the reforms. (See the Coutts UBS comment here.) On the other hand, some wealth managers remain concerned about issues such as high Chinese debt, as in the case of Rothschild Wealth Management recently.

“We are particularly impressed by the measures to reduce the power of the central and local governments, to support the private sector companies, to improve the efficiency of the state-owned enterprises, to reform the household registration, or `hukou’, system, and to change its one child policy. Importantly, the report also sets specific targets for these reforms, with the goal of achieving them by 2020,” Horrocks continued.

He said a focus on market economics, a move away from state ownership and a stress on the importance of market allocation of resources meant the economy will be more sustainable and balanced in the future.

“We see the reform announcements as largely supportive of our approach, in trying to identify competitive companies with long-term sustainable growth prospects that are run on efficient business models. We believe an environment that encourages such companies to grow is a positive one for long-term investors,” he said.

“Similarly, we see the tweaking of a legal system in the Shanghai Free Trade zone - also announced recently - as an interesting development. The legal system goes from a prescriptive `this is what you can do’ method to one based on a list of things you cannot do and, therefore, leaves markets and companies to decide what can be done. This is more like the US/UK legal systems that have shown to be very supportive of service economies, particularly financial services. This is a very thoughtful and self-aware piece of reform and one that we intend to follow closely,” he added.