According to the latest International Monetary Fund (IMF) projections, China’s GDP output will fall 2% percent in the near term due to the latest trade war with the United States and 1 percent in the long term. However, the strength in the technology sector for China could help mute the effects.
“To rejuvenate growth policymakers must undo the trade barriers put in place with durable agreements, rein in geopolitical tensions and reduce domestic policy uncertainty,” said IMF Chief Economist Gita Gopinath.
Per CNBC report, the IMF said further that it “also modeled what would happen if multinational firms in the United States, euro area and Japan reshored enough production to reduce nominal imports by 10%. The lender found that it would drive up consumer prices and reduce domestic demand, while throttling the spread of technology to emerging economies.”
“At 3% growth, there is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions,” it said. “Further escalation of trade tensions and associated increases in policy uncertainty could weaken growth relative to the baseline projection.”
New IMF Chief Says Global Economy Is in a Synchronized Slowdown
China Tech to the Rescue?
Can China’s burgeoning technology sector make up for any deficits in its GDP?
With a U.S.-China trade war still weighing in the balance for the capital markets, investors can forge on irrespective of trade negotiation results with China technology-focused exchange-traded funds (ETFs). A key metric to look at is the FTSE China A Innovative Enterprises Index, otherwise known as “China’s Nasdaq.”
Created in 2009 by the Shenzhen Stock Exchange, the ChiNext Board has been referred to as “China’s Nasdaq” for the innovative and growth-oriented Chinese firms it has attracted over the last decade. And this growth potential has been recognized in 2019, as reflected by a nearly 37% (CNY) year-to-date return for the FTSE China A Innovative Enterprises Index.
- Invesco China Technology ETF (NYSEArca: CQQQ): CQQQ is based on the AlphaShares China Technology Index, which is designed to measure the performance of the investable universe of publicly-traded information technology companies open to foreign investment that are based in mainland China, Hong Kong or Macau.
- Global X MSCI China Information Technology ETF (CHIK): CHIK tries to reflect the performance of the large- and mid-capitalization segments of the MSCI China Index that are classified in the Information Technology Sector as per the Global Industry Classification System.
- KraneShares CSI China Internet Fund (NasdaqGM: KWEB): KWEB tracks a portfolio of Chinese internet and internet-related companies. The portfolio includes Chinese internet companies that provide similar services as Google, Facebook, Twitter, eBay and Amazon.
For more market trends, visit ETF Trends.