Archive for February, 2023

Investing in China – Risk & Opportunities

Posted on: February 20th, 2023 by fwAdmin

Investing in China – Risk & Opportunities

When investing your money, it’s important to be diversified across asset classes, factors (see here for a recent blog post explaining this), business sectors and regions. In this blog, we take a look at the Chinese market, highlighting 5 risks and opportunities that need to be considered when investing here.


Since 1978 China has averaged 10% annual growth in their GDP, placing them second in the world with GDP of $12.23 Trillion behind the US with $19.48 Trillion.

So, what are the reasons for this impressive growth?

Over the last 5 decades, economic reform has changed China from a highly rural country to urban – many predict that this will continue for the next 20 years. There is a certain ‘snowball’ effect when a country goes from rural to urban. Cities need to be built, which requires rapid growth in infrastructure, commerce, and other services. This rapid growth requires more education, more education generally means people become wealthier and a wealthier society means more businesses are set up thus leading to even more wealth.

China is considered as the ‘worlds manufacturer’, but it wasn’t always this way. The reallocation of resources to more productive uses, especially in sectors heavily controlled by central governments, such as Farming, has boosted efficiency across the board. Looking at farming as an example; Investment into agriculture by the State has boosted efficiency which has freed workers to pursue new opportunities in other sectors. This decentralisation of the economy led to a huge increase in new private firms who were more market orientated and a larger share of the economy was exposed to competitive forces.

Foreign direct investment into China led to new technology which further boosted productivity.


As with any investment, there are specific risks associated with investing in China. Some of these are as follows:

  1. Slowing of GDP Growth

Can the 10% average annual GDP growth continue? Many sceptics do not believe so – especially if its State driven. Coupled with this, if the powers that be continue to impose restrictions on foreign firms this will reduce the likelihood of this continue growth further. Foreign enterprise accounts for a significant share of China’s output but this is falling – 2.3% in 1990, 35.9% in 2003 and most recently 25.9%.

  1. Geo-political Relations

China may align itself further with Russia and become less dependent on the US. We could even see an emboldened attack on Taiwan which could lead to similar sanctions we have seen placed on Russia.

  1. Ageing Demographic

In 1980 China’s population was rapidly expanding and the government launched its ‘one-child’ policy which ended in 2016. This policy has led to a rapidly aging society and by 2035 more than 30% of its population with be over 60. This has led to a declining workforce and a need for an increase in spending on healthcare and elderly services meaning less resources for elsewhere.

  1. Zero Covid Policy

China is still implementing a zero Covid policy – an outbreak of cases results in whole cities being sent into lockdown which slows the economy. An outbreak in Shanghai could result in the port being shutdown which would not only slow China’s economy but the world’s, given that China is the ‘worlds manufacturer’.

  1. Government Corruption

There is a view that alleged corruption can play a major part in success/failure rather than market forces. As well as this, due to the court system in China, intellectual property rights can be hard to protect and enforce.


China is c.20% of the world’s population so is it too big to ignore? Below are 5 points which may suggest there is an opportunity for investing in China.

  1. GDP Growth

I have highlighted GDP as both a risk and opportunity… China is restructuring its economic model after a successful period of going for growth. The new model aims for sustained growth with an emphasis on innovation as the new driver. The new focus will provide a lot of opportunities for new businesses to grow and flourish.

  1. Less Bureaucracy

The government is aiming for China to be the number one economy in the world and will use all its power to help it achieve this. If they want to bring in a policy to help them achieve this, less bureaucracy within their system will mean they can.

  1. Geo-political Relations

China is currently benefitting from cheap fuel from Russia. We have all seen the impact of extortionate fuel prices in the UK so nothing further needs to be said!

  1. Low Inflation

Coupled with the cheap fuel from Russia, China didn’t offer much financial stimulus during Covid which is helping to keep inflation down. As well as this, they produce a lot of their own resource in country so are being less impacted by global inflation.

  1. Valuations

Chinese stocks are on affordable valuations at 8x price to earnings ratio whilst the UK is 14x and the US is 19.5x. This means that Chinese equities are at a discount compared other markets.


To summarise, as with any market, there are risks and opportunities with investing in China and it’s our job to assess your circumstances and conclude if an allocation to China is suitable for you. Generally, China would be more suited to high-risk clients with a long timeframe for investing but some exposure can be achieved for lower-risk clients through an Asian fund.

As always, if this blog has raised any questions, please get in contact with your adviser.

The content of this newsletter is for your general information purposes only and does not constitute investment advice. It is not an offer to purchase or sell any particular asset and it does not contain all of the information which an investor may require in order to make an investment decision. Please obtain professional advice before entering into any new arrangement. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Your capital is at risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.


Financial Planning v Investment Management

Posted on: February 1st, 2023 by fwAdmin

“A goal without a plan is just a wish”

You have some money to invest – an inheritance or spare income after a pay rise, or perhaps you are reviewing your existing accounts – but are the investments you hold the most important piece of the puzzle?

Investing, on its own, can be done cheaply and easily, but it can be extremely worthwhile to pay for the professional services of an investment manager or financial planner to help manage your money effectively.

Investment management focuses solely on the investment of a client’s assets, with the investment manager making decisions on where your money is invested, usually targeting an agreed level of risk and timeframe. You can also incorporate personal preferences such as only investing in socially responsible companies. You benefit from the ongoing research carried out by the investment management firm, and their expertise in selecting the “best of breed” funds or shares from the 1,000’s that are available.

Financial planning looks at the bigger picture, creating a strategy for how your investments, savings and other assets can help to meet your financial objectives. Most importantly, this is based on your personal circumstances, making sure any plan is specific to the individual or family being advised. Your financial planner will help you work out your priorities and where compromises may need to be made to build a realistic and achievable plan for your future. For example, you may want to save for your retirement and already be investing in a pension, but do you know if you are saving enough or the age you could afford to stop working? Furthermore, do you have a strategy for taking an income when you do retire to make sure you don’t run out of money?

As with investing, you can create your own financial plan but the added advice and expertise from a financial planner can be invaluable, especially when you need an impartial opinion or reassurance during difficult times. As an example of where this hand holding can deliver results we can look back just 3 years to the start of the Covid-19 pandemic. You may have been tempted to sell all your investments to cash when markets fell by 25% in the space of a month(1) but had you remained invested you would have achieved a +19% return by the end of the 2022 calendar year(2).

Financial planning and investment management go hand in hand with both aspects an important part of creating a solid long-term strategy. At Five Wealth, we believe the financial plan should be the starting point for anyone looking to start saving towards a financial goal or reviewing their existing arrangements. We then build an investment strategy around your personal risk appetite and financial goals. Regular reviews are essential to keep your financial plan on track and ensure the strategy and investments continue to meet your objectives and reflect any changes to your circumstances. We aim to create lasting ongoing relationships with our clients, developing a successful financial plan backed up by a strong investment strategy.

Five Wealth Ltd is a Chartered Financial Planning and Wealth Management firm based in Central Manchester. We provide independent financial advice to clients throughout the UK, managing assets of c.£660m. Our bespoke financial plans aim to meet the specific needs and circumstances of everyone we work with from business owners to individuals and families. Further information on our services can be found on our website here.

If you would like to discuss our financial planning services in more detail, please get in touch:

Amy Grace – Associate Director and Chartered Financial Planner


Mobile: 07966 590 849

Your capital is at risk. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a guide to future performance. Investments should be considered over the longer term and fit in with your overall attitude to risk and financial circumstances.

“A goal without a plan is just a wish” – Antoine de Saint-Exupéry

The blog originally featured in the Manchester Law Society Messenger, February 2023.