China’s Power in Emerging Markets Creates Headache for Global Investors

China’s outsize position in emerging markets has created a dilemma for investors as many rethink their heavy exposure to the country. JPMorgan recently proposed creating a new, enhanced version of its Asia credit index to provide more diversification across countries.

March 5, 2023 . 2:49 PM

1 min read

China’s outsize position in emerging markets has created a dilemma for many investors.
Investment funds with similarly large allocations to Chinese assets did well in 2019 and 2020, when the country’s rise drove gains in emerging markets.
A bout of exceptionally poor performance for Chinese stocks and corporate bonds has led many investors to rethink their heavy exposure to China and how it has hurt their returns.
The British asset manager recently launched an Asia high-yield bond fund that is underweight on Chinese debt.
At an American pension fund, the Maryland State Retirement and Pension System, directors and staff have been discussing whether and how to cut back the fund’s exposure to China.
JPMorgan recently proposed creating a new, enhanced version of its Asia credit index that it said would provide more diversification across countries.
In the U.S., the Teacher Retirement System of Texas is cutting its target allocation to China by half in its multibillion-dollar emerging-markets stock portfolio.
The moves by big investors to shift some assets to other Asian markets are taking place just as the clouds over Chinese stocks are clearing.