Five common concerns when allocating to China

Will the next century belong to China? We discuss investors’ common concerns on China’s growth trajectory, accessing domestic growth, geopolitical risks and rising superpower displacement.

14 May 2021

11 minutes

The fast view

  • China is, quite simply, an opportunity too big to ignore; there is little doubt that the most populous country in the world is — and increasingly will be — a major force in directing global capital markets. Its economy has been a success story of the pandemic, but investors worry about whether it will continue to grow.
  • They also want to know whether China A-shares offer insulated exposure to China's growth. We believe they do, which is why we launched a dedicated China A-shares strategy in January 2020 to capture the country's compelling domestic growth through its increasingly accessible onshore market.
  • Geopolitical disputes, ranging from tensions with the US to disagreement with the Australian government, remain in the headlines and a concern for investors. However, we believe such incidents are to be expected as China evolves towards becoming the world’s largest economy.
  • Another common concern is the US executive order banning investment in Chinese companies it claims have military ties. In this Q&A we explain our firm's position and the potential implications.
  • Will the next century belong to China? Rising superpower displacement is an issue that investors have had to consider throughout history. We argue that if investors considering whether to invest in rising economic superpowers over the last 500 years had put behavioural bias to one side and had invested based solely on fundamentals, in just about every instance, it would have been a profitable trade.
  • We address these concerns in detail in the Q&A, and in doing so, explain why we believe the long-term reward of investing in China significantly outweighs the risks.

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Specific risks

Geographic/Sector: Investments may be primarily concentrated in specific countries, geographical regions and/or industry sectors. This may mean that the resulting value may decrease whilst portfolios more broadly invested might grow. Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.

General risks

The value of investments, and any income generated from them, can fall as well as rise.

Authored by

Wenchang Ma
Portfolio Manager

Important Information

This communication is provided for general information only should not be construed as advice.

All the information in is believed to be reliable but may be inaccurate or incomplete. The views are those of the contributor at the time of publication and do not necessary reflect those of Ninety One.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

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