Why China's stock market is out of touch with the economy

Another reason why the performance of the stock market may not keep up with economic growth is that the goals of local companies may be different from those of long-term investors. In China, like many emerging markets, companies may invest in projects aimed at expanding market share, regardless of the impact on their share prices. Ge Yihao, managing director of Longzhou Jingxun Consulting Co., Ltd. said: "The company is not interested in returning minority shareholders. Their interest is to expand the scale. "

In addition, corporate governance in China may not be strict, and the accounting system is not transparent. Yao, senior investment manager of Aberdeen Asset Management Asia, said that in order to find high-quality companies with good business models, "we must conduct many field visits to ensure that the interests of entrepreneurs are consistent with those of listed companies."

In addition to low returns, investors in China funds also face other risks. They may even have a hard time understanding what they are buying. This is because different funds have different definitions of "China". Some funds, such as Yao's fund and Guinness Atkinson's China Mainland and Hong Kong Fund, invest most of their shareholders' funds in companies listed in Hong Kong. Other funds also buy companies in Taiwan Province Province or multinational companies with many businesses in China. "Not all China funds are the same," said William Rocco, a Morningstar fund analyst.

Rocco said, besides knowing what buying the China Fund will bring to him, he should also consider whether he really needs to buy the China Fund. He said: "If your investment is balanced, then you won't miss China's economic growth." Many international and emerging market funds include China stocks, and multinational companies from the United States and Europe have also made a lot of profits in China.