Those investing in the Chinese market have long done so hoping to profit from China’s breakneck growth. But China’s growth has slowed over the past year or so, as evidenced most recently in China’s weak July PMI report. It’s no wonder, then, that Chinese stocks have drastically underperformed developed markets over the last year.

Over the last 12 months, the MSCI China Index returned roughly 5% in dollar terms. Although this beats the 2.6% return for the MSCI Emerging Markets Index, it lags noticeably behind the 24% return of the MSCI World Index, an index of developed markets, during the same period.

But in my opinion, it’s time for investors to change how they think about Chinese stocks. There’s a strong case for why the Chinese market should now be viewed as a value, rather than a growth, play.

First, a little primer on investing for growth versus value. A growth company is one whose earnings are expected to grow at an above average rate. Similarly, a growth country can be thought of as one that is growing faster than the global growth average. While growth companies tend to be younger and smaller, growth countries tend to be smaller emerging economies, and both are typically priced based on their growth potential.

On the other hand, a value company, or country, tends to be more mature, bigger, and priced lower than where it should trade based on various fundamentals. Over time, both companies and countries can transition from growth to value plays. For instance, twenty years ago, a fast growing Microsoft (MSFT) was generally viewed as a growth play. Today, depending on its price, it’s more of a value play.

So here are the two main reasons to put China in the value category today.

China is the second largest economy in the world. While China’s growth is certainly still robust, it’s slowing. This, however, shouldn’t be a shock to investors. When an economy is as big as China’s is now, you would expect its growth to slow. In my team’s opinion, China has reached the size where investors should be focusing mostly on whether China looks cheap relative to its fundamentals. In other words, as a maturing economy, China is more like Microsoft today than Microsoft two decades ago. While China’s growth rate is still important, it should be of secondary importance to investors, assuming it doesn’t crash.

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