A number of factors are supporting the outperformance in Chinese technology company shares, such as the growing Chinese economy, the ongoing shift from an export-oriented economic model to greater domestic consumption and rising popularity of online shopping – according to official Chinese data, online sales of physical goods jumped 28.6% in the first six months of the year to 2.37 trillion yuan or $350 billion and now make up 8.5% of China’s overall retail sales.
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Furthermore, many of these Chinese companies have diversified their businesses to capture greater growth potential. Many China tech companies have started out as social media firms that expanded through advertising, but they would also diverse into other areas like finance to help provide better diversification benefits, which have in turned helped greater investments.
“Improvement of the Chinese infrastructure, on the other hand, will help to boost the ecommerce market, as the number of consumers will increase and the diversity of products will tackle different demographic groups,” according to Seeking Alpha. “If we take a look at the diagram below, we will see that ecommerce retail sales will continue to grow on an annual basis and the overall market is expected to be worth $840 billion by 2021.”
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