China injected over $130 billion into its markets over the past two weeks as rising bond yields and strong regulations on corporate debt drove investors from equities. This is in line with an effort from the Chinese government to crack down on debt in order to ease investor sentiment. Chinese markets have rallied since early 2016 after experiencing a dramatic decline during the popping of 2015-2016 stock market bubble.
This led some to speculate that the Chinese economy was overburdened with credit and at risk of a prolonged dip. These fears have turned out to be unfounded, and once again a booming Chinese economy is leading Asia. The International Monetary Fund (IMF) recently raised its 2017 GDP growth forecast for China to 6.8%. In 2018 the IMF expects growth to slow to 6.5%, which is still higher than a previous projection.
Investors who want to take advantage of this rebound should take a look at the iShares China Index ETF (TSX:XCH). The ETF has climbed 31.7% in 2017 and 24% year over year. Priced just below $30, the ETF is nearing the all-time high it reached during the height of the stock market bubble in 2015.
The IMF did list some risks in its growth projection for next year. The aforementioned excess of debt continues to concern experts, as well as “a slower rebalancing of activity towards services and consumption”. China has obviously listened to criticism from the IMF in dictating its new policies. The iShares China ETF could soar to new heights in 2018 on the back of its growth and reforms.