Your Question Answered: Investing in China—Risk or Opportunity?

Overall, given China’s outsized population and its transition from an agrarian to an industrial economy, as well as its evolution toward a consumer-driven society, we think the investment opportunities (companies doing business with China and Chinese companies doing business beyond its borders) are vast.

But this is China we’re talking about—we know that such outsized opportunities come with outsized risks, including China’s leaders imposing restrictions on some of its most innovative companies and “reeducating” its entrepreneurs. Both actions are more than warning shots—they’ve had material impact on such companies’ prices and an existential toll on their business leaders.

Our current direct exposure to China, then, is so small as to be nearly de minimis, but every investors’ indirect exposure to China continues to scale up—it is difficult to conceive of anything from an electric toothbrush to a car to a supercomputer that isn’t impacted by China’s interests, economic activity and reach.

So, we look at data, read reports, listen to fund managers and converse with each other about China as often as we discuss any major macro theme. We’re looking at what each reversion to their prior hardline version of communism means to investments there, here and elsewhere. We’re cognizant that the harder a line China takes, the greater the backlashes against its government could be (most likely first manifested in trade relations).

Shutting down—rather than keeping open—lines of communication between the world’s two super-economies and superpowers, would be dicey, as would be China reversing course on its free-market progress. But rest assured that we won’t just hope the old diplomatic line holds true: So long as we’re talking, we’re not fighting. We’ll stay informed about what’s going on inside the world’s second-largest economy as it relates to our own, and what’s transpiring regarding the world’s second superpower.

My apologies for an ambiguous response, but there’s unlikely to ever be a simple, clear answer to your excellent China question. Most importantly, from our investment perspective, investing alongside you and with our thoroughly informed and deeply experienced fund managers, we have the highest conviction in our ability to access opportunities in any marketplace we want to explore or remain in. And we may want to do both, with regard to China, over the span of the next decade or two.

Ask us a question: We’re always interested in the topics or concerns you might like us to comment on. Ask us a question about investing, the markets or financial planning and one of Adviser Investments’ experts will answer it in a future edition of The Week in Review. CLICK HERE NOW TO POSE YOUR QUERY.

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.