China now has the largest middle-class in the world, surpassing the US for the first time, according to a recent report from Credit Suisse. Supporting middle-class expansion over the long-term is the government’s recent decision to lift the one-child policy.
No doubt the mainland’s changing demographic profile will have huge long-term implications for the development of the emerging new economy. By some accounts, China has clearly moved away from manufacturing and export-led growth and consumption and services now account for just over half of GDP growth.
Driven by the rise of the middle class, new economy sectors expected to benefit include online retail, discretionary consumer products, financial products and real estate.
Despite the positive news, many investors remain concerned about slowing GDP growth. The market tends to disblieve official GDP figures, leading to concerns about a hard landing.
As China’s massive economic transition continues, Fund Selector Asia compares the BGF China Fund against the Allianz China Equity Fund.
Luke Ng, senior vice president at FE Advisory, has provided a comparative analysis.
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The BlackRock fund’s benchmark is the MSCI EM China 10/40 Net TR index while the Allianz fund tracks the MSCI China Total Return index.
The MSCI China 10/40 is a free floated-adjusted market capitalisation index that measure equity market performance.
The MSCI China Total Return differs in the fact that it captures mid- and large-cap companies across China H shares, B shares, red chips and P chips, covering 143 constituents, which make up 85% of China’s investible universe.
Even though the indices are constructed differently, they do take into account similar large and mid cap Chinese equities, Ng said.
