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How Can Foreign Investor's Approach China's Industrial Sector

An enviable manufacturing capacity of China is best complemented by insatiable domestic markets of the country that has made it a formidable Industrial power house. The manufacturing output has gone up from RMB 2893 to RMB 11203 in the years between 2001 and 2009 [figures are in billions and as per Euro monitor 2009 Data]. The domestic consumption too has matched up so much so, that in order to deal with the rapid rise in the middle class population of the country, the state has laid out clear instructions in its Twelfth Five Year Plan, to add 36 million new housing units by the 2015. Furthermore, increasing the domestic consumption's share to the real growth is also a priority as per the same plan.

Amid positive growth and policy support, the Sino Industrial sector has been a growth driver both for the economy and the investors. Value growth may follow the investments in China Industrials sector simply because of the healthy inventories and balance sheets of the key production companies. This logic itself may show risk resistance to market speculations and the existing global gloom that engulfs most prime stock exchanges today. Western investors who are long on the Sino Industrials may find suitability through China Industrial ETFs owing to the diversified exposure that is achieved with much simplicity. Market traded funds are similar to equity in terms of their liquidity, although the trading volumes may be lower but spot prices are refreshed periodically and adding on to the benefits are favoured tax norms and wide spectrum asset pool which discounts for any individual company wise downside. An operational expense is involved here which may vary between 0.60% to 0.70% depending on the fund issuers but being bench mark bound means a safe environ for the investors and through a bona fide index these products are easy to track as well.

China is known for its big population that doubles up as world's largest consumer market. In the last couple of decades this nation has had an image upheaval in terms of its industries being state run to now privately owned or capitalistic. China's premium firms are in the oil and gas sector. Also foreign investment is encouraged by the government in the key industries of this country.

The natives have expanded their networking through cellular phones and broadband internet. It has been said that approximately 5 million users are added to the list of cell phone consumers. Also according to a research china's broadband user base grows 52% on a year on year basis.The rise in the middle class will directly impact the services and consumer sector positively. China is currently the world's second largest economy which is catching up fast with the US of A.

Chinese goods are everywhere be it auto parts, telecommunication and electronic equipment and the local electronic produce has a huge demand in the foreign countries. The sale of passenger cars in the nation itself has tripled since the year 2000. The major car makers are still owned by the state. But some have formed an association with multinational auto companies and are benefitting with training in high quality and international standard of production.

Invest China Industrials Sector offer exposure to the engineering, construction companies, industrial equipment, transportation and building material stocks and indeed a favourable investment because of the tax benefits and cost advantages. Also one does not have to depend upon individual stocks or price governed index baskets.

The Manufacturing sector has grown the most in this eastern economy and the gains are easily reflected through the performance of the Solactive China Industrial Index's; the benchmark has outperformed major indices and the broader markets with a Year to Date [YTD] returns of 22.41%. The performance of the selective Chinese Industrials Equity is again unmatchable but whether the past performance catapults into returns in the future remains to be seen.

Global X China Industrial ETF [CHII] delivers as per the performance of the name sake Solactive Index. The bench mark which has thirty six [36] securities shows a big dependence on the company equity involved in Industrial Equipments, Building Materials and Transportation. Top three assets for CHII ETF are China National Building Co., Weichai power Co. and China Railway Group Ltd.