Annual Report 2020

China Merchants China Direct Investments Limited Annual Report 2020 28 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) PROSPECTS The low-base effect is expected to drive China’s economy to grow significantly in the first quarter of 2021, compared to the corresponding period of 2020, unless the novel coronavirus pandemic regains strength in 2021 and spreads extensively, as it did in early 2020. It is expected that pent-up demand from the 2020 Spring Festival may lead to a surge in activity during the 2021 Spring Festival, which is likely to further boost domestic consumption in the first quarter of 2021. As the low-base effect gradually fades, overall economic growth may normalise, and may be supported by a global economic recovery. Given that there are some uncertainties around economic growth in China for 2021, due to the pandemic, and China’s economic restructuring is still in a critical period as well, it is expected that the operating results of the investment projects (mainly operating in China) held by the Fund will be impacted to a certain degree. The Central Economic Working Conference convened in December 2020 and has concluded that macro policies in 2021 shall strive to foster continuity, stability and sustainability, while proactive fiscal policies and steady monetary policies shall be implemented to sustain necessary support for economic recovery. The policies will be implemented in a precise and effective manner without any radical change, and the timing, extent and effectiveness of policies shall be monitored and adjusted as needed. According to the Conference, there are eight key tasks for 2021, as listed below. The first is to strengthen the nation’s strategic science and technology capabilities. The second is to enhance independence and control in industry chains and supply chains. The third is to continue to expand domestic demand as a strategic basis for economic growth. The fourth is to advance certain reforms and to encourage openness in a well-rounded way. The fifth is to responsibly manage seed banks and farmland issues. The sixth is to enhance anti- trust regulation and to prevent capital expansion disorderly. The seventh is to mitigate the pronounced housing problems in big cities. And the eighth is to work well to peak carbon dioxide emissions ahead of the schedule and to achieve carbon neutrality. In addition, it was also emphasised at the Conference that efforts shall be made to guide China’s economy toward operating within a proper range, to continue to work well with the “six stabilities” and “six guarantees,” to properly manage the pace and intensity of macroeconomic controls, and to implement economic policies in a precise and effective manner. Meanwhile, policy actions will continue to invigorate market entities, to optimise policies on taxes and fees reduction, to enhance inclusive financial services, and to vigorously push forward reforms and innovations in order to add vitality to market entities, especially to middle, small and micro businesses, and to self-employed traders. Given that China’s economy shows both resilience and great potential, its long-term economic outlook for prosperity has not changed and the potential for investment demand remains strong. As an example, the AI industry and new-type infrastructure construction will continue to receive greater support from government policies, as well as more attention from capital markets. With the advent of the big data era, along with improvements in algorithms and enhancements in the accuracy of unsupervised learning, AI enters a period of rapid growth in which “big data + AI” will profoundly change the structure of traditional industries. It is here that the Fund will continue to seek out the best opportunities for investment.