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China’s rapid development is recognized as one of the most important shifts in the global economy
The country has experienced explosive growth over the last 25 years.
Source: World Bank (Oct 2019)
1 Source: World Bank, April 2020.
2 Source: Wind, March 2020.
Investments in China are subject to certain additional risks, particularly regarding the ability to deal in equity securities in China due to issues relating to liquidity and the repatriation of capital.
Political and regulatory frameworks may constrain investment choices. Investors will need to balance the investment case for gaining exposure to China with possible investment restrictions – and may need to consider indirect exposures to China.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor may not get back the amount originally invested.
Now the world’s second largest economy, China is a major global player – and is on a trajectory to rival the US.
Source: World Bank (July 2020)
With China’s real annual GDP growth averaging 9.5% through 2018, the World Bank describes the pace of growth as the fastest sustained expansion by a major economy in history.
However, annual economic growth has not always translated into comparable growth in domestic stock markets.
In 2020, China started to lift some of the restrictions on foreign investments. This creates an entirely new investment opportunity – an opportunity that can no longer be ignored.
China’s A-share market consists of over 3,500 companies, and has a combined market capitalization of over US$9 trillion, making it one of the largest equity markets in the world.
Source: Goldman Sachs, June 2020.
Chinese consumers spent $4.7 trillion in 2017, up from $3.2 trillion in 20121. Therefore with consumer demand driving China’s economy – this sector is a significant area of focus for investors2.
1 Source: Financial Times, Feb 2019
2 Source: Knoema, Aug 2019
China’s consumer is going to be a key driver of global growth in coming years
Not only is China now more open to investment, it is also the source of new business opportunities – driven by a growing middle class and domestic consumption.
China already has the world’s largest robot market and the government is actively promoting the robotics industry with tax reductions and special R&D funding.
China will inevitably face unprecedented challenges as it proceeds to lead global economic growth.
However, China’s changing economy is creating a new landscape of opportunity for potential portfolio growth, and it may continue to do so for the coming years.
If foreign investors exclude China from their portfolio, they may risk missing out on the explosive potential of the vast market.