China's Xinhua News Agency has announced a series of major changes in the government's domestic policies, heralding a significant move towards liberalization and privatization. As part of an effort to "improve human rights and judicial practices," Xinhua notes the government will close re-education camps established under Chairman Mao Zedong. As for specific market-related changes, I would highlight these three:
While China ranks as the world's most populous nation, the one-child policy has had a distinct impact on slowing growth, as have restrictive land and lending policies. As a result, China now stands at a crossroads. The exceptional GDP expansion of the past decade, driven by infrastructure spending, must give way to broader consumer-driven demand.
This is the epic transition ex-Morgan Stanley Chief Steven Roach has long advocated in Bloomberg Television interviews. Most China ETFs created over the past 5-7 years have focused on basic industries such as construction, mining and telecommunications -- see The China Fund (CHN), iShares China Large-Cap ETF (FXI) and SPDR S&P China ETF (GXC).
More recently, Global X Funds have launched a consumer-focused exchange-traded fund for China under the ticker CHIQ. Mainland consumer companies account for 69 percent of the assets of the fund, which currently holds 40 positions and trades an average 135,000 shares a day. Here are the top five allocations in what is one of the best publicly traded vehicles for capturing the significant long-term changes announced today in China.