October 18, 2021 Latest News

How to Invest in the Chinese Economy to Get Profit in 2021?

China has consistently made new ways and is now emerging as a strong force in the world today. For a very long time now, the country has continuously posted evidence of its growth. From the growth rate currently taking place with the Chinese economy, it won’t be a surprise if it overruns that of the US. That means that in the nearest future, China will be a global force.

The country’s economic growth is also aided by the large population it has. A popular investor and business tycoon (Warren Buffett) recently advised people to invest in such a market. That is because, in 2015, the Shanghai Composite fell to about 25%, making China’s stock market’s performance to decrease.

The year 2021 has brought great improvement in the relations between China and Thailand. Also, migrating from Thailand to China has become a lot easier. The implication of this is that there are great potential and opportunities for investors to embrace through the Chinese economy. Investing in this economy promises huge profits, but you need to know how to go about it.

First, you need to know about China’s economy before you begin.

China’s Economy

Many years ago, China was a strong power in the world, but due to some events that took place a couple of decades ago, the story became different. The stagnation that the country experienced was induced by food shortages and wars. Deng Xiaoping assumed power in 1978, after which a journey to a glorious comeback began. China started laying more emphasis on market-oriented developments.

Today, the manufacturing and production sector is now globally, and it has surpassed that of the US. The country also has policies that encourage foreigners to invest. China is currently aiming to become a sustainable and customer-driven economy.

Here’s a statistics showing the 2020 breakdown of how China performed economically:

  • Gross Domestic Product (PPP): $24.2 trillion
  • Unemployment Rate: 8%
  • GDP per Capita: $10,839
  • GDP Real Growth Rate: 3% (2020) 8.1% (2021f)
  • Inflation Rate (CPI): 9%

What are the ways to Invest in the Chinese Economy?

Investing in the Chinese economy can be done in various ways, including domestic exchanges and foreign exchanges like ETFs. To date, ETFs remain the most frequently used investment avenue in China.

With ETFs, you won’t have to worry about unwarranted investment implications. However, if you want to make stick with companies, businesses, enterprises, or organizations located in China, ADRs won’t be a bad idea for you.

ETFs include:

  • SPDR S&P China ETF (NYSE: GXC)
  • iShares MSCI China ETF (NYSE: MCHI)
  • iSHares China Large-Cap ETF (NYSE: FXI)

ADRs include:

  • China Mobile Ltd. (NYSE: CHL)
  • PetroChina Company Limited (NYSE: PTR)
  • New Oriental Education and Technology Group Inc. (NYSC: EDU)
  • Baidu Inc. (NASDAQ: BIDU)

There are other options to utilize. For example, you can choose to make use of affiliate firms in China or embrace other market makers.

If you are considering exchanges, you’d need to know the top options available. They include:

  • Shenzhen Stock Exchange, with more than 10,000 securities and 2,000 companies
  • Shanghai Stock Exchange: When it comes to capital raised, among the leading exchanges in the world.
  • Hong Kong Stock Exchange: More than $35 trillion market capitalization and about 2,500 companies.

Understand the Risks

Investing in stocks, especially foreign ones, is great for the profits you can accrue and because you can build your portfolio through it. With the remarkable economic development in China, new markets have greater chances of expanding and growing. However, it is crucial to be wary of some risks, especially when investing, irrespective of the type of stocks you choose.

Different places, including China, either have political crises and huge changes. Therefore, the amount you invest should depend on what you are ready to risk.

Here are some of the dangers of investing in the China Economy:

  • Changing Demographics: The main factor contributing to the increasing success of China’s economy is the younger generation, as well as the affordable workforce. However, that is likely to change since the population is aging.
  • Social Instability: There’s currently a huge wealth disparity in China. The implication of this is an increase in social instability and capital outflow. For example, the poorest 20% don’t own up to 2% of national household wealth, while the richest 1% own up to one-third.
  • Less Predictable: Unlike other governments like European Union members, or the US, China’s government has shown that it is less predictable.

Is Investing in the Chinese Economy a good Idea?

For years now, China has continuously recorded tremendous success in many areas, even though the financial market had a slightly different story in 2015. The drawbacks people mention with respect to investing in China cannot outweigh the inherent benefits.

Here are some of the most important reasons to consider the investment offers:

  • Increasing Global Status: Most of the United States debt and many other countries are currently in China. That gives the country more chance to influence global politics and become the biggest economy globally.
  • Robust Economic Growth: As mentioned earlier, the country has recorded unmatched economic growth, especially when compared to other countries. The growth is beyond what is experienced in other countries.
  • Enormous Local Market: China’s market is highly appreciated and valued on both local and international scales. That’s why there are many business opportunities for international and local investors.
  • Stable and Appreciated Economy: There are so many improvements that have helped to make the economy stable. That is why foreign investors will continue to open up businesses in China.

Final Thoughts

The whole world recognizes the impact of China and its market and the efforts the country has put to ensure sustainable growth. With the type of consistency it has exhibited, the future holds a lot of promises.

What’s certain is that venturing into the investment opportunities from the country in 2021 will yield huge profits. That is why we have shown you ways to maximize these opportunities.

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