China's 5-Year Plan to Self-Sufficiency Can Help these ETFs | ETF Trends

Self-sufficiency within a five-year timeframe will be one of the goals for China when its policymakers meet to discuss the economy this week, according to a recent Bloomberg article. This ambitious goal could bode well for China-focused exchange-traded funds (ETFs).

Per the article, the goal of the meeting is “to hammer out the country’s future economic blueprint, offering clues on how the leadership plans to pivot the world’s second-largest economy to be more self-sufficient. The four-day meeting of the Communist Party’s Central Committee will take place behind closed doors from Monday in Beijing. Known as the plenum, the discussion this year will focus on the framework for China’s 14th five-year plan that runs from 2021 through 2025, as well as the vision and targets for the next 15 years.”

“In the coming five years, policies are expected to be formulated around the idea of ‘dual circulation’ raised by President Xi Jinping, in which China is seeking to create a more self-reliant domestic economy supplemented by external trade,” the article noted further. “Domestically, the strategy would require China reshaping its production to satisfy local demand and bolster consumption.”

In terms of iron clad details, China has been mum about specifying a specific target growth rate in terms of gross domestic product (GDP).

China’s GDP Targets

“Analysts are watching closely whether officials will set a specific target for gross domestic product growth in the five-year plan or give a broad description of the goal,” the article added. “The government didn’t set an annual growth target this year amid the uncertainty unleashed by the coronavirus pandemic. The previous five-year plan set an average growth target of above 6.5%.”

“Current market estimates are for a growth target in the range of 5-5.5%, while we think 5% would be a reasonable number, with China needing 4.5% annual GDP growth to achieve high income status by 2025,” Morgan Stanley economists led by Robin Xing wrote in a note this week.

Here are a few ETFs that could benefit moving forward:
  • Xtrackers CSI 300 China A-Shares ETF (NYSEArca: ASHR): seeks investment results that correspond to the CSI 300 Index. The underlying index is designed to reflect the price fluctuation and performance of the China A-Share market and is composed of the 300 largest and most liquid stocks in the China A-Share market.
  • Xtrackers Harvest CSI 500 China-A Shares Small Cap ETF (ASHS): seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 500 Index, which is designed to reflect the price fluctuation and performance of small-cap companies in the China A-Share market and is composed of the 500 smallest and most liquid stocks in the China A-Share market.
  • Xtrackers MSCI China A Inclusion Equity ETF (ASHX): seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI China A Inclusion Index, which is designed to track the equity market performance of China A-Shares that are accessible through the Shanghai-Hong Kong Stock Connect program or the Shenzhen-Hong Kong Stock Connect program.

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