The China investing narrative has had a rocky 2023, with geopolitical risk and a high savings rate limiting the country’s reemergence from “Zero COVID” rules last year. That said, China investing remains an important consideration for investors and advisors looking over their portfolios. It remains a source of diversification away from U.S. equities, and with news that the IMF had upgraded its growth projections for China, it may be worth eyeing an ETF like the KraneShares CSI China Internet ETF (KWEB).
The IMF, or the International Monetary Fund, not only upgraded China’s 2023 outlook, but also the outlook for 2024. The global financial regulator raised China’s growth outlook to 5.4% from its previous 5% forecast for 2023, while raising its 2024 forecast to 4.6% from 4.2%. The organization changed its outlook following news that the Chinese government would approve $137 billion in sovereign bond issues to support the economy.
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The new report from the IMF also cautioned that more fiscal reform to address the country’s real estate debt situation could help. Still, the growth upgrade boosts the near term investment case for China. The right cocktail of government fiscal support and reform could unlock Chinese consumer spending, which has been limited for much of the year by record savings from the lockdown period.
KWEB as a Key China Play
If that “revenge spending” finally does start to kick off in earnest, an ETF like KWEB could benefit. KWEB tracks the CSI Overseas China Internet for a 69 basis point (bps) fee. The index looks to offer pureplay exposure to software and information stocks in China’s tech world.
It has returned 20.3% over the last one year and outperformed its ETF Database Category average over the last month per VettaFi. For those looking at news that China’s growth might be higher than expected, it may be worth considering moving forward.
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