December 06, 2023

Investing in China: Does the opportunity outweigh the risk?

After years of fast expansion, China is shifting towards high-quality development via its’ latest roadmap, with its government setting the groundwork for further opening of the country’s capital market through a series of supportive policies.

In our research we focus on China’s equity market and review its constant evolution, growth and diversification across sectors and industries, offering reasonable growth adjusted valuations. We also provide insight into how investors can gain full exposure to China via the FTSE China A50 Index and FTSE China 50 ecosystem.

Key takeaways

- There have been some recent positive developments that make a strong case for investing in China despite the negative impacts of the real estate crisis and geopolitical tensions at present.

- The FTSE China A50 Index:

o Transparently reflects the development of China’s onshore market.

o Represents China’s offshore market and is complementary to China’s onshore market.

- FTSE China A50 + FTSE China 50 offers exposure to the complete China equity market.

Points of differentiation:

FTSE Russell has a long history of offering access to China’s capital market and has built an ecosystem around China A and HK listed stocks to enable greater flexibility in this ever-changing market.1

FTSE Russell provides a new tradable way for investors to gain full exposure to China through the FTSE China A50 Index and FTSE China 50 ecosystem. Both FTSE China A50 and FTSE China 50 feature extensive histories and provide effective representation of the China A-share market and offshore markets.

With differing industry exposure profiles in the A-share and offshore markets, the two indices complement each other to provide a complete model of China’s financial landscape. Investors can gain access to China via the index-linked products and index derivatives based on FTSE China A50 Index and FTSE China 50 Index.

What does the research mean for our clients? 

No market is without risk, a more informed understanding of the nature of policies undergirding China’s next stage of growth, the degree of maturity and openness of its capital market and the performance characteristics of its equity market offers a constructive view for assessing Chinese investment opportunities.

The case study in the final section showed that a combination of China A50 and China 50 futures track the overall Chinese equity market well. Just as the Chinese economy is undergoing a fundamental transition, so is the means for international investors to access this next stage of growth.

1 China onshore vs. offshore equity: understanding their unique exposure