China is pursuing its own transformative path to growth.
Participate in this unique investment story.
Why now is the time to reconsider China
China is changing. Its economic growth is increasingly driven by innovations and investment in technology, data and science. Its capital markets are developing with a similar energy, on their way to becoming an integrated part of the global financial system.
Now is the time to get ahead of the opportunities as an investor.
Innovation, transformation and investment: key drivers of China’s growth
Advanced-manufacturing sectors such as ecommerce, biotechnology and electric vehicles have the potential to add more value to China's economy than traditional manufacturing, and investment flows reflect this. China's leadership role in these areas ensures that it will no longer be seen as a country that imitates others’ success.
What will the “China of the future” look like?
Some of China’s most significant transformational efforts include the success of domestic brands, a growing emphasis on sustainability and a commitment to leadership in advanced technologies. Supported by investments in R&D and infrastructure, these transformations are set to change the face of the Chinese economy over the coming decades.
The rise of domestic brands
Improvement in product quality is boosting dominance of local brands
In 2010, only 10% of smartphones sold in China were domestic brands; now it's close to 90%1
Becoming a green pioneer
China plans to achieve carbon neutrality by 2060 (and peak CO2 before 2030)
China has been the largest investor in renewable energy over the last decade 2
From imitation to innovation
Healthcare: drug development is surging China is the world's largest genetic databank3
Cryptocurrencies: watch out for the first truly digital currency in a major global economy
Are you taking the right approach to investing in China?
No matter whether you're new to investing in China or someone with extensive experience, it may be time to take a fresh look at your existing approach.
Some of the biggest global benchmarks have already increased their China allocations. These are the indices against which many portfolios are constructed. Yet while China is due to become the world’s largest economy by 2030, its current weight in benchmarks is a fraction of the existing biggest economy – the US. Consider allocating more to China than the benchmarks.
It could be time to view China as its own asset class – one that may deserve a dedicated, standalone allocation. You can even start by making small changes to what you have. Adding even a small amount of China A-shares to an emerging-market allocation may be able to help improve your risk/return profile.
Investing in China using only passive, index-tracking vehicles means missing out on the value that active management seeks to add. For example, China equities can be volatile, with valuations making large movements both up and down. This can, for example, be seen during the regulatory challenges and Covid-19 lockdowns in 2022. Active managers help add a layer of risk management to every investment decision.
How can China help diversify your investments?
China’s markets have historically exhibited low correlations to other major markets – meaning they frequently move in different directions. This means investing in China could potentially bring diversification benefits.
Equities are available in a range of exchanges – from Shenzhen and Hong Kong listings to the Nasdaq-like STAR market.
Bonds can be accessed in onshore and offshore markets, and denominated in US or Chinese currencies, to help achieve a range of diversification objectives.
Our China expertise is deep and broad
In many ways a unique market, China is still unfamiliar to many investors. Partnering with someone who understands this dynamic region is critical. At Allianz Global Investors, we have a wealth of research capabilities across our investment platform, including proprietary insights from our Grassroots Research ® team, with correspondents in China and across Asia.
Discover our investable themes
To stay focused on their goals, investors may need to reposition portfolios to factor in rising interest rates, shifting inflation expectations, and fluctuating exchange rates. Geopolitical turbulence is creating new flash points. Volatility is set to be a hallmark of the coming period, with countries and regions on different paths in terms of growth and monetary policy. Investors may struggle to find safe havens and, with only limited visibility of how markets will develop, expectations could be upended. But we are also confident this environment will create opportunities. Diversification is key – across public and private markets – and we have the ideas and expertise to help you navigate the complexity.
We think it’s time to disrupt traditional definitions of “disruption”. Once a story for the tech sector, disruption is now all-encompassing. And while technology and AI may be driving many of the changes, this new wave of disruption could shape every aspect our daily lives. The implications will be profound and exponential – and many of the themes arising from Covid-19 will likely be permanent fixtures.
Sustainable investing is at an inflection point. Interest in sustainability has turned into significant investments, and these inflows rightly come with increased expectations about impact and measurement. Investors are at different stages of their sustainability journey and have different ambitions. We’re focused on bringing sustainable investing into the real world, with a focus on pragmatic approaches and the pathways that support real progress.
China is changing. Its economic growth is increasingly driven by innovations in technology, data and science. Its capital markets are developing with a similar energy, on their way to becoming an integrated part of the global financial system. Understanding the country’s unique political context and strategy is essential to grasp the opportunities as an investor and participate in this unique investment story.
Infograph: China’s path to growth
1. Source: eMarketer. Data as at 2020.
2. Source: Statista. Data as at 2021.
3. Source: Statista. Data as at 2021.
4. Source: Welt. Data as at 2021.
5. Source: McKinsey, as at July 2021.
6. Source: WIPO, Allianz Global Investors, as at end 2020.
7. Source: Goldman Sachs. Data as at July 2020.
8. Source: Hurun Research Institute, Nikkei Asia review. Data as at 2019.
9. Source: Belfer Center for Science & International Affairs.
10. Source: International Federation of Robotics, as at January 2022.
What will the "China of the future" look like?
1. Source: Chinese Academy of Information and Communication Technology, data cited in Aroged, July 2021.
2. Source: Global Trends in Renewable Energy Investment 2019, United Nations Environment Programme, September 2019.
3. Source: Building of the World’s Largest DNA Database: The China Case, Ausma Bernot, December 2020.
How can China help diversify your investments?
Diversification does not guarantee a profit or protect against losses.
Infograph: Allianz Global Investors’ China expertise
Source: Allianz Global Investors. Assets under management data as at 30 April 2022.
The Grassroots Research® division of Allianz Global Investors commissions investigative market research for asset-management professionals. Research data used to generate Grassroots Research® reports are received from independent, third-party contractors who supply research that, as far as permissible by applicable laws and regulations, may be paid for by commissions generated by trades executed on behalf of clients.
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