China Position 2021: Sustaining institutional interest

Invesco teamed up with Economist Impact to understand how institutional investors invest in China today.

China position

About the research

China Position 2021

Sponsored by Invesco and written by Economist Impact, this report is a follow up to the 2019 China Position study. Despite headlines of tech and trade tensions or decoupling pressures, asset owners remain considerably invested in China. We explore why. 

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Key findings

For the 2021 research, 200 asset owners were surveyed on their views with the aim to better understand the sentiment these large—often market making—funds have in terms of investment stance toward the Chinese market. The research is designed to go beyond media headlines to address the actual strategy and exposure levels of the world’s largest institutional investors. Learn more about the key findings of the report.
China

Hope against headwinds

Over the next 12 months, 60% of respondents in the 2021 survey still expect better economic conditions in China relative to those globally. While that majority does represent a slip from three-quarters of respondents in 2019, it still demonstrates optimism despite a context of trade tensions, regulatory uncertainty and continued pandemic-related headwinds.

Expectations of economic conditions in China relative to global economic conditions over the next 12 months

Source: The Economist Intelligence Unit; sample size: 200

Appetites up

Covid-19 has increased the risk appetite of over half of survey respondents regarding their China exposure. North American respondents were the most optimistic among the regions, 60% of respondents reported increased risk appetite as a result of the pandemic.

Impact of the COVID-19 pandemic on overall China exposure in the past 12 months

Source: The Economist Intelligence Unit; sample size: 200

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China exposure is growing

Half of survey respondents say exposure to China increased over the past 12 months. Drivers include:

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Improvement in the expectations of the growth potential of China’s economy or of listed-company profits 

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Improvement in the quality of financial intermediaries within China (up 8% from 2019).

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Improvement to their organisation's China expertise

But challenges remain

Challenges to investment mainly centre on issues of trust and transparency, such as a lack of trust in corporate reporting, low regulatory transparency and opacity in China’s financial system for foreign investors. 

Challenges to investment

Source: The Economist Intelligence Unit; sample size: 80

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Technology themes dominate

Technology innovation and financial services remain the top investment sectors for survey respondents, consistent with the 2019 survey, with healthcare and domestic consumption themes also capturing interest. Likely given a boost from the pandemic, internet or online themes gained the most ground with investors since 2019. 

Investment themes over the next 12 months

Source: The Economist Intelligence Unit; sample size: 200

And ESG investing is on the rise

ESG investing among asset owners is having a growing influence on China exposures; a majority (62%) of survey respondents always or often adopt ESG investing with their China exposures and two-thirds say their China exposure grew due to ESG goals. Yet respondents still face challenges around ESG data transparency and availability.

Primary challenges to expanding or incorporating ESG considerations into China investments

Source: The Economist Intelligence Unit; sample size: 200

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  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

    When investing in less developed countries, you should be prepared to accept significantly large fluctuations in value.

    Investment in certain securities listed in China can involve significant regulatory constraints that may affect liquidity and/or investment performance.