The economic growth seen in China over the last half-century or so has been built on being the ‘world’s factory’ but how central is manufacturing today to the Chinese market and economy?

In broad stock market terms, if we take the industrials sector as a rough proxy for manufacturing, the weighting afforded this space is not that significant. It represents just 4.3% of the MSCI China index compared with 28.2% for consumer discretionary stocks and 22.8% for communication services.

The MSCI A China index, which is focused on domestic Chinese shares as opposed to the MSCI China which encompasses shares listed in Hong Kong and overseas, has a more significant weighting to industrials at 14.8%, the third largest sector after financials and information technology.

Battery manufacturer Contemporary Amperex Technology (300750:SHE) or CATL for short is the second largest stock by market value in this index.

In terms of the Chinese economy the World Bank calculated manufacturing represents around 25% of GDP on a value-added basis. While significant, this is down from 32% two decades ago.  World Bank figures also show the services sector has increased as proportion of GDP from 42% to 57%. 

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit www.temit.co.uk

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