A decade ago, China was seen as a potential goldmine for savers looking to boost their Isas.
Back in 2007, the Chinese economy was booming, growing at an impressive 15 per cent a year, and its stock market had hit a record high.
But since then economic growth has halved, the stock market has tumbled 46 per cent and the country’s debt has ballooned.
It’s been enough to send investors scarpering back to UK, U.S. and European stocks.
Slowdown: Since 2007, China’s economic growth has halved, the stock market has tumbled 46 per cent and the country’s debt has ballooned
Now, though, fund managers are ploughing money back into Chinese firms, encouraged by increasing stability in the Chinese economy.
A year ago David Jane, manager of CF Miton Cautious Multi Asset Fund, didn’t have any money in China.
Today, more than 5 per cent of the fund is invested in Chinese firms. Mr Jane says: ‘China has leapfrogged the West in some areas, especially in terms of adopting new technology.
‘They have some fabulous and massive companies in this area and at some point China will be the biggest economy in the world. You can’t ignore that.’
So should you follow the experts and let China inject some life into your portfolio?
Until recently, investors were worried China was heading for a crisis as its economy and exports slowed.
But trade has picked up again and its growth rate seems to be settling at just under 7 per cent a year.
Another major sign of health is the amount of money Chinese citizens are spending online.
Last year, internet sales hit £590 billion, with Goldman Sachs predicting them to reach £1.3 trillion by 2020.
Fund managers are ploughing money back into Chinese firms, encouraged by increasing stability in the Chinese economy
One of Mr Jane’s favourite Chinese companies is New York-listed Alibaba, which is worth nearly £284 billion.
The 18-year-old internet giant, which owns brands such as Sina Weibo and Youku Tudou — China’s answers to Twitter and YouTube — is expected to increase revenues by 49 per cent to more than £26 billion this year.
Known primarily for internet shopping and e-commerce, Alibaba this month bought an 18 per cent stake in Lianhua, one of China’s leading supermarket chains with more than 3,600 stores, as it tries to push into offline sales.
Ben Yearsley, of Shore Financial Planning, is a fan of CF Miton Cautious Multi Asset, which has turned £10,000 into £12,900 in five years.
Another manager looking to cash in is Colin Dryburgh of Kames Diversified Growth, tipped by Darius McDermott, of broker Chelsea Financial Services. It has turned £10,000 into £11,990 in five years.
Mr Dryburgh ignored Chinese firms a year ago, but now invests more than £3.50 in every £100 of savers’ money there.
While he believes the country is still a risky bet, it’s his favourite market at the moment.
‘There are a number of things that are worrying, such as excessive debt growth and the risk of wealthy Chinese people sending money out of the country to the U.S.,’ he says.
‘But these are things investors have been worrying about for years and the Chinese economy is now showing signs of strength.’
Employees working in the Chang’an automobile factory in Beijing. Trade in China has picked up again and its growth rate seems to be settling at just under 7 per cent a year
He invests in Anta Sports, based in Jinjiang in the province of Fujian.
Anta is reaping the reward of the Chinese government’s drive to turn the country into a sporting powerhouse by topping the Olympic medals charts and winning the football World Cup within the next 15 years.
It announced that sales of sports goods and clothing had grown by 50 per cent in the first three months of 2017.
Another of Mr Dryburgh’s picks is Huaneng Renewables, which develops and operates wind farms and solar power plants.
Mr Yearsley also recommends Artemis Global Emerging Markets. A year ago, manager Raheel Altaf was investing £27.80 in every £100 in China. Today that figure stands at £32.
As well has having big stakes in China Construction Bank and Alibaba, one of Mr Altaf’s top picks is Geely Automobile, the world’s 16th-biggest car manufacturer, which has more than 18,000 employees.
Geely, which owns Swedish marque Volvo, recently bought a 49.9 per cent stake in Malaysian car giant Proton, a move that will not only give it access to a market of 600 million people but also make it the main owner of iconic British sports car brand Lotus.
Mr Altaf’s fund has turned £10,000 into £12,000 since it launched just over two years ago.
‘People have been very concerned that China is not going to be able to manage an economic slowdown and that there will be severe repercussions around the globe,’ he says.
‘But the evidence from last year is that they have managed the slowdown reasonably well and the economy has been pretty stable.
‘The concerns that investors have had have led to a number of cheap investment opportunities.
‘We think it’s an area you can’t afford to ignore.’
However, Mr Altaf warns against putting too much of your money in China as the risks of losing cash are still high. ‘The risk of political meddling is always a concern,’ he says.