Despite China being given an “emerging market” (EM) designation, the label may not do its unique role in the world economy justice, reports an article in Institutional Investor. China is, for example, the world’s 2nd largest economy, owning 19% of the world’s GDP—second only to the US, which account for 23% of world GDP. China’s A-share market also happens to be the world’s 2nd largest equity market. 

Index providers are separating out China A-shares. MSCI is now offering separate A-share indices and is encouraging investors to view China’s onshore market as a distinct investment opportunity.  

“By breaking [China] out, an investor can right-size the weight of the A-share market to its actual representation in the EM universe,” says Gabriela Santos, global market strategist at J.P. Morgan Asset Management. Many popular EM indices do not give China’s A-share market its fair weighting. 

China will follow the development of the Japanese market. Santos: “[China] is moving in the direction of Japan. Japan is thought of separately from the rest of Asia [and] separately from other developed countries. We think [that in] time, that will also be the case with China. It’ll just become its own separate allocation.” 

Source: https://www.institutionalinvestor.com/article/b1wsfd6x7qqx5y/Why-Allocators-Are-Treating-China-as-a-Standalone-Asset-Class