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Is now a good time to invest in China?

30/04/2024

Based on GDP, China is the second largest economy in the world. Since implementing free-market reforms and opening itself up to foreign investment and trade in the late 70s, China has been one of the fastest-growing global economies. But is that enough to appeal to individual investors? 

 

Current and future growth

The OECD predicts that China will have the second-highest global GDP growth rate in the next couple of years. However, this won’t be without its challenges. 

In 2023 the country only just managed to meet its 5% GDP growth target, coming in at 5.2%. There are many reasons behind this: a declining population, high youth unemployment figures, debt and deflation being just a few.

As a result, China’s stock market performance has slowed. The CSI 300 index – which features the top 300 stocks on the Shanghai and Shenzhen stock exchanges – peaked in 2021, but has declined by 40% since then. Similar, over the course of 2023 the FTSE China index fell by 16.63%. Foreign direct investment in China is down, and the country’s real estate issues have yet to be resolved.

Despite all of this doom, gloom and uncertainty, there are some glimmers of hope. 

 

High future returns? 

Many Chinese shares are currently trading at significantly lower prices than they have in the past. However, with the OECD predicting strong GDP growth for this year, could these prices start to rise? 

It will, in part, depend on whether China can get past its existing problems. However, China is home to some of the largest global companies – such as Tencent and Alibaba – and certainly has potential for growth. 

With so much of the stock market’s performance currently dependent on the intervention of the state, though, it remains to be seen where things will go in the future. 

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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