“Structurally in China we are seeing huge changes, including shifts in consumption trends, rapid urbanisation and the emergence of a middle class,” he says. Of the countries in the Asia Pacific region, Chan identifies China as having the greatest growth prospects.However, he also sees a number of political, structural and cyclical risks associated with China. The current political tension with Japan, corruption, problems with pollution and water shortage, huge disparities in wealth and rising oil prices are all factors that contribute to risk. Chan does not expect any change in the short term to the renminbi’s peg to the dollar, despite increasing pressure from the Bush administration, other governments and multilateral organisations. “They will adopt the policies they see fit. From China’s viewpoint it wants to maintain stability in the economy and employment.” He says that China wants to be seen as trying grow its economy in a balanced way rather than focusing on exporting at all costs. He adds that while there has been a perceived slowdown in China, he does not see a “hard landing” as likely. Overall, Chan says the focus of Asian companies is shifting to profitability from attaining market share. Stocks trading on low multiples should contribute to the long-term outperformance of Asia Pacific as a region.