Why China

Long-term growth prospects

After a period of astonishing growth and transformation. China is on the cusp of becoming the world's largest economy and is progressing towards developed-nation status.

The country already possesses the second-largest equity and bond markets. We believe its long-term growth prospects will be driven by:

The re-balancing of its economy and the rising wealth of Chinese consumers
World leading tech innovation and a digitally connected society
The revitalisation of China's rural economy

Tapping into domestic growth

China’s economy is rapidly shifting from investment-heavy export industries to more sustainable, consumer-oriented sectors. Fuelling economic expansion, the spending power of Chinese consumers is rising.

China’s middle class is expanding, and with it its disposable income. By 2030, the middle class is expected to represent 75% of China’s population and have equivalent spending power to the US middle class.

Spending power: per capita annual disposable income (% of population)

Source: The Economist Intelligence Unit December 2018

Exposure to an emerging technology superpower

China is one of the world’s most digitally savvy societies. Its 750 million connected citizens spend an average of 27 hours online each week, and the digital economy now contributes a third of China’s GDP¹.

Number 1: Robot market by annual sales²
Number 1: Installed wind generation capacity³
Number 1: Installed photo-voltaic capacity⁴
Number 1: By number of registrations of pure battery electric vehicles⁵

Invest in China and you gain exposure to an emerging technology superpower. Underweight China, as broad benchmarks effectively do, and you are positioned against some of the sectors expected to propel global growth in the years ahead.

Source: ¹GTGN - Jul 2018, ²Annual Report - Sept 2019, ³Global Energy Council - Feb 2019, ⁴World Economic Forum - June 2019, ⁵IEA,- June 2020

Rural China set for turbocharge

China’s rural economy is vast, understudied and underestimated. Yet over the last two years, rural China has quietly become central to President Xi Jinping’s reform plans, as he believes China’s ability to fulfil its major economic goals all critically depend on turbocharging the rural economy.

The development of rural China is a story of integrating an economy on a vast scale. It will be achieved by rural reform, meritocracy in government and e-commerce:

3 pillars of rural reform

Boosting rural income
Improving food security
Achieving environmental sustainability

Political meritocracy

Meritocratic system helping to drive rural growth
Rural revitalisation now a key metric for individual promotion
Move away from purely growth metrics; refocus on quality

E-commerce

A key growth driver supported by policy momentum
Significant smartphone penetration
Transport network improvement

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

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.