A Closer Look at China

China’s ascension over the past twenty years to the second largest economy in the world has changed the global landscape in a variety of ways. As China’s economic size and market capitalization grows, many investors have reasonably been pondering how to treat their allocations to Chinese assets. In this Topic of Interest white paper, we will first briefly discuss the rise of China as an economic power and the development of Chinese asset markets. Second, we outline the average investor’s exposure to Chinese assets over time and how this exposure has naturally grown due to the changing market capitalization of Chinese assets, and also due to common benchmark providers significantly increasing the weight of China within those benchmarks. Third, we take a deeper look at the ‘China story’ that has led many institutions to allocate greater capital to this market, and identify the historical performance impact of Chinese assets on portfolios. Last, we offer some potential opportunities and threats around Chinese investment that should help provide context to investors in their decisions around this market.