China and the world

China continues to grow, now the world’s second-largest economy gaining fast to rival the United States. In the past investors outside of China have struggled to access the country’s full range of growth opportunities. Even now foreign ownership accounts for just 3% of Chinese assets¹. But this is changing rapidly and the cost of ignoring this opportunity might prove too high, especially over the longer term.

¹Source: PBoC, March 2020, includes publicly-listed Chinese equity securities denominated in RMB, incorporated in China and onshore bond issuance, including both government and corporate debt.

It can be tempting to see the prospect of ongoing tensions and the resulting increase in localised political pressure as a reason not to hold any Chinese exposure in portfolios. But from an investment perspective, BlackRock believe this could be a costly decision for investors. Despite near-term challenges it should be considered that China will continue to become an increasingly key engine of global growth, further, an allocation to China is a crucial opportunity for portfolio diversification particularly given Western economies are facing the potential of a larger state role in corporate activity. We believe a neutral starting allocation to Chinese assets should be significantly higher than where most international investors currently are