While there has been much focus of late on China’s risks, there are ample opportunities for investors—and the real risk may be not participating in this country’s growth.

Worries about China’s credit growth still loom large. The massive deceleration we saw in industrial production growth, from 15% to below 6%, ended in 2015, but investors are still concerned about the extent to which debt has built up in China and continues to balloon. While China’s debt is substantial—well over 200% of gross domestic product—fears of a debt crisis are overblown.

Now that China’s domestically listed companies (A-shares) will be formally included in the MSCI Emerging Markets Index, the need to look seriously at its companies is growing.

First, China’s debt is held domestically, and it’s concentrated in state-owned enterprises, with the Chinese government as the creditor. Would you ever default on yourself? It’s not likely that China will either.

Second, against that backdrop, nascent Chinese financial markets are moving past the embryonic stage and, while they are still far from maturity, companies on the Shenzhen Stock Exchange now represent firms from those sectors that are driving China’s growth—information technology, entertainment, leisure, all sectors aimed at a growing middle class. Foreign investors can now invest in these companies and tap these opportunities.

One manifestation of the immaturity of China’s capital markets is that most Chinese companies are covered by one broker, or at most two. That creates an exciting opportunity for investors to bring their own experience and due diligence to help identify top performers.

And, now that China’s domestically listed companies (A-shares) will be formally included in the MSCI Emerging Markets Index, the need to look seriously at its companies is growing.

Whether it is risky for investors depends on how you view the risks. The risk from my perspective is not participating in the opportunity.

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2018 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

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