China's economy - the second largest in the world - is in the midst of a transformation from an investment-led to a consumption-led model.
The shift away from low-cost labour-intensive production, towards advanced manufacturing and green tech is creating a wealth of unique and compelling investment opportunities.
China's growth rate may be slowing following years of breakneck expansion, but it is forecast to significantly outperform most developed markets in 2023. ‘Looking at the short-term, China is the only major economy that is going to grow meaningfully from a low base this year.' Says Sandy Pei, Co-portfolio Manager, Federated Hermes.
Beijing's abandonment of its strict zero-Covid policy at the turn of the year has boosted the economy, which has rebounded strongly. It is one of several factors that underpin the attraction to Chinese equities at present. The government has also thrown its weight behind a raft of measures to boost growth. Many analysts forecast full-year growth of more than 6%.
Federated Hermes China Equity, which seeks to deliver long-term outperformance through a value-led contrarian style and an absolute return mindset, is uniquely well-positioned to tap into the opportunities available to global investors in Chinese equities.
Read the case for Chinese equities in charts from Sandy Pei, CFA, Deputy Portfolio Manager, Asia ex Japan.
This advert is for professional investors only. The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Any investments overseas may be affected by currency exchange rates. Past performance is not a reliable indicator of future results and targets are not guaranteed.
Investments in emerging markets tend to be more volatile than those in mature markets and the value of an investment can move sharply down or up. The views and opinions contained herein are those of the author and may not necessarily represent views expressed or reflected in other communications. This does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments. Issued and approved by Hermes Investment Management Limited ("HIML") which is authorised and regulated by the Financial Conduct Authority. Registered address: Sixth Floor, 150 Cheapside, London EC2V 6ET. HIML is a registered investment adviser with the United States Securities and Exchange Commission ("SEC").
FAQs
Your willingness to participate in China's future economic growth story is therefore key to making a decision about investing there. In a nutshell, China is certainly cheap right now, but it's worth considering all the factors behind that when deciding whether or not to invest.
Why is it good to invest in China? ›
Tremendous domestic market
China's rising purchasing power, expanding middle class, and a population over 1.4 billion, touts it to become the largest retail market in the near future. In 2023, for example, total retail sales of consumer goods hit RMB 47.15 billion (US$6.55 trillion).
What are the problems with investing in China? ›
Companies are being raided and employees detained. The CCP is clearly more interested in control than growth. This has directly influenced foreign investment because of Chinese efforts to close and otherwise harass companies that undertake due diligence services for foreign investors.
What are the advantages of Chinese investment? ›
They point out seven ways Chinese investment contribute to African growth: commodity prices (China's demand for resources raised commodity prices), capacity to extract (many African countries lack the capacity to extract their own resources), infrastructure (China's contribution to African development is arguably most ...
Which industry to invest in China? ›
- Featured Sectors.
- Manufacturing and Supply Chain.
- Energy and Infrastructure.
- Industrial and Resources.
- Food and Beverage.
- Retail and Consumer Brands.
- Services Sectors.
- Technology.
This can be done at low cost by using ETFs. On the Chinese stock market you'll find 13 indices which are tracked by ETFs. The speciality of China are the three categories of Chinese stocks: A-stocks, B-stocks and H-stocks. Alternatively, you may invest in indices on Emerging Markets or Asia.
Is China good place to invest? ›
Why consider investing in China? China is the largest country in the MSCI Emerging Markets Index, representing about a quarter of the index by market capitalisation. China is the second-largest economy in the world thanks to its exponential growth, with the World Bank reporting that GDP reached $18 trillion in 2022.
Is China still a good place to do business? ›
Despite these challenges, China remains an attractive market for many organizations. The country offers unparalleled access to one of the world's largest markets and a highly competitive global supply chain.
Where is China investing most? ›
However, more than 60 percent of the total FDI volume in 2022 was transferred to Asia's financial hub, Hong Kong, and around ten percent to the Cayman Islands and British Virgin Islands, which makes it difficult to identify final investment destinations.
Is China financially in trouble? ›
Growth rates are flagging as an unsustainable mountain of debt piles up; China's debt-to-GDP ratio reached a record 288% in 2023. But even that eye-popping figure does not capture the uncomfortable fact that much of it was borrowed to buy assets that no longer yield enough income to repay the debt.
China's overall debts have widened to the equivalent of more than 300% of gross domestic product, far in excess of the 253% of GDP the U.S. owes. A chunk of China's debt is owed by its local governments.
Why avoid investing in China? ›
China will struggle with a weakening in the three pillars of growth up to now — the property market, infrastructure and exports, she said. A lack of clarity on China's policymaking, along with patchy economic data, add to concerns about investing there, Mossavar-Rahmani said.
What are the pros and cons in China? ›
Living in China has its pros and cons. On one hand, the cost of living is very low and there is an abundance of opportunities for cultural exploration. On the other hand, there are language barriers, air pollution and limited healthcare options.
What is the biggest advantage of China in the world? ›
It is the country with the greatest expanse of new forest resources. China tops the world in terms of new energy use and progress in energy conservation. Between 2015 and 2020, its energy consumption per unit of GDP fell by 13.2 percent and carbon emissions dropped by 18.8 percent.
Is China a good place to invest in? ›
Why consider investing in China? China is the largest country in the MSCI Emerging Markets Index, representing about a quarter of the index by market capitalisation. China is the second-largest economy in the world thanks to its exponential growth, with the World Bank reporting that GDP reached $18 trillion in 2022.
Should I invest in China 2024? ›
Investment opportunities in China
Given forecasts for a still-strong 4.6% GDP figure for 2024, the Chinese economy may be jelling just in time for global investors.
Are China stocks recovering? ›
The rebound is promising, soothing three years of losses when the index tumbled from its all-time high in February 2021. In all, almost US$10 trillion have been erased from Chinese stocks listed at home and overseas over the past three years.
Should I invest in China mutual funds? ›
Diversification is key as it helps them protect their returns. For Indian investors, looking at international diversification, investing in China—the largest economy in emerging markets—has been a compelling option. But the recent performance of China-focused funds has done little to instil confidence among investors.
