The future of Chinese ETFs

China’s 19h Party Congress went into session yesterday, and each and every investor holding shares in Chinese companies are carefully following the news from Beijing. However, they are not the only ones that are interested in this event, as this is also a very important time for those who own shares in Chinese ETFs.

During this Party Congress, President Xi Jinping is set to announce some degree of political shuffling in order to gain enough power to speed up the political process in the future – experts claim. “China’s 19th Party Congress is an opportunity for the leadership to signal a shift in policy priorities towards structural reform and could be a platform for stronger implementation of President Xi Jinping’s agenda if, as is widely expected, he consolidates his power,” said Fitch Ratings.

The recent concern about the slowdown of the Chinese economy may to a certain extent be attributed to the expiring tax rebates that affected auto sales in 2016. Nevertheless, overall consumption has shown to be steadfast and resilient. “Stabilising measures have been successful, but the government’s ability to meaningfully tackle the economy’s main structural challenges will be limited [..]” said Fitch. For this precise reason, those concerned are more agitated about the Party’s ability to address necessary structural reforms. This, keeping in mind that the Chinese economy needs to grow at a rate between 6.0% and 6.5% through 2020 in order to realise policymakers’ goals (the Chinese economy grew by 6.8% in the third quarter).

Therefore, it would be wise to carefully observe the reaction of the market to the events of China’s 19th Party Congress. Efficient markets reflect all available information, and this will certainly have an effect on the performance of Chinese ETFs as investors come to a verdict on what they may expect over the next five years.

The table shows the performance of 3 best performing ETFs that track Chinese market.