By: Sandrine Soubeyran, director research and analytics
Since the introduction of economic reforms some 40 years ago, China’s economy has transformed into a formidable driver of global growth. As the country continues to open its equity market to international investors, they will find a market with a broader set of industries. And also—perhaps surprisingly to some—they will see an increase in focus on the green economy.
China’s economy has expanded rapidly over the past several decades, and has now grown to become the second largest in the world. As our recent research shows, the country owes this growth to decades of policy and economic reforms, as well as the openness of its markets to attract international capital, strong exports, and the substantial urbanization of its society.
China a leader among G20 economies
Furthermore, Financials largely dominated the FTSE China Intl All Cap Inclusion (no Quota) Index a decade ago, and while Financials still remains the most heavily weighted sector, its prominence has fallen while others have grown. As a result, today the index is more diversified across a broader section of industries.
China’s evolving sector landscape is in part being shaped by the global transition to a green economy—in which China has been perhaps an unexpected participant. High levels of air, water and soil pollution has spurred the Chinese government to heavily invest in environmental initiatives. In 2017, Chinese investments accounted for 45% of the global total.
Within a broad green economy universe of some 3,000 companies, China now represents 12% of the market with both the number of green companies and their green revenues exposure outpacing many other nations.
China has become a significant participant in the green economy
An example of this can be found in the renewable energy sector, where China has made significant investments. The country is uniquely placed in that it’s become a global market-leader in the production of solar panels. It’s also rapidly taking market share in the manufacture and adoption of electric vehicles, noted as one of the fastest growing markets for these vehicles in Q1 2017. To limit the country’s waste and reduce costs, the authorities have introduced alternative schemes. For example, recent projects have included setting capacity limits in regions with high waste rates, launching a nationwide carbon emissions trading market and issuing via the China National Renewable Energy Centre green electricity trading certificates.
Investors might find China’s efforts to invest in sustainability encouraging, as the green economy has seen considerable growth in recent years. And regulatory reforms continue to open doors in China’s markets, providing opportunities to international investors as they look to diversify their exposure to a market where the majority have historically had no access.
FTSE Russell continues to support these investment choices with years of experience in the mainland China market. As the first international index provider of mainland Chinese benchmarks, we’ve developed an index product suite that demonstrates the breadth and depth of this important market.
 Source: EV-volumes.com as of Q1 2017, http://www.ev-volumes.com/country/total-world-plug-in-vehicle-volumes/
 Source: FTSE Russell paper, Investing in the global green economy: Busting common myths on ftserussell.com
© 2018 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE GDCM”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”) and (7) The Yield Book Inc (“YB”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE GDCM, MTS Next Limited, Mergent, FTSE FI and YB. “FTSE®”, “Russell®”, “FTSE Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “WorldBIG®”, “USBIG®”, “EuroBIG®”, “AusBIG®”, “The Yield Book®”, and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, FTSE GDCM, Mergent, FTSE FI or YB. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the FTSE Russell Indexes for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell Indexes is provided for information purposes only and is not a reliable indicator of future performance.
No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing contained in this document or accessible through FTSE Russell Indexes, including statistical data and industry reports, should be taken as constituting financial or investment advice or a financial promotion.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE GDCM, MTSNext, Mergent, FTSE FI, YB and/or their respective licensors.