Fund Manager Of The Decade David Herro says that, while they are causing short-term bumps, the decline in oil prices and reforms in China should help investors down the road.

“We think company valuations are still compelling; genuine reform in two of the larger emerging market economies, China and India, should help to rekindle the global economy; and the stronger U.S. dollar should help generate positive earnings in most foreign companies,” Herro says in his fourth-quarter letter to shareholders of his Oakmark funds.

Herro says China President Xi Jinping has initiated a corruption crackdown and is expected to implement other reforms that could have a big impact on the Asian superpower. “If he succeeds, the result should be characterized by an economy that is more open, efficient and consumption-led,” Herro writes. “Though this change may lead to lower growth rates, those lower rates may signify more sustainable growth.

“As far as investment implications, we believe these changes should all be quite positive,” writes Herro. “Of course, the adjustment will take time, and the uncertainty surrounding this adjustment may result in cautious behavior by some economic participants, which may negatively impact current conditions, as we are witnessing today. Once there is more clarity and a belief that the anticorruption crackdown is winding down, we should see increased confidence, consumption and growth. Furthermore, given today’s market conditions, where participants extrapolate today’s weakness to perpetuity, prices of businesses exposed to the Chinese consumer are quite weak. We think this presents us with great opportunity and bodes quite well for our portfolios, as we have measurable exposure to the Chinese consumer.”

Herro cites two major risks regarding China, however. One is what could occur if the country’s shadow banking system has destroyed more wealth and savings than currently believed. The second is what would happen if Chinese leaders try to micro-manage consumption habits, encouraging some types of spending while discouraging others. He thinks that is unlikely, though.

As for oil, Herro says that while energy companies and countries that depend on oil exports should suffer from the price decline, users of everything from fuel to plastics to petrochemicals should benefit. He thinks the declines should boost global growth and corporate earnings.