China’s economic expansion over the past few decades has culminated in a country now considered to be one of the dominant global player’s on a number of fronts.

As the Chinese New Year approaches this Sunday, now is a good time to consider whether an investment in this developing country is worthwhile.

Despite a long stretch of positive news, it has been a mixed 12 months for the country.

China’s economy grew more in the last quarter of 2012 than it had done in the previous seven quarters, with its full year growth totalling 7.8%.
Despite this growth being the slowest in China for 13 years, it still generated approximately a third of global economic growth and is now the world’s second largest economy.

Stuart Welch, chief executive officer of TD Direct Investing, says encouraging news in recent weeks about China’s recovering economy seems to have prompted an appetite for the country among investors.

He says: “This Chinese New Year brings with it the year of the Black Snake – its attributes include focus and discipline.

“With such varying reports in the news – such as talk of China recovering combined with on-going pessimism about the UK economy – investors should take heed from the snake and remember to remain focused and disciplined when it comes to investing.”

China’s slowdown has largely been attributed to weaker demand from the West but the quality and pace of growth in China is arguably more sustainable than before.

One positive is the fact Chinese policymakers achieved the much sought after “soft landing”, where the pace of growth did not judder to a complete halt. This would have had far-reaching implications for the world economy.

The Chinese authorities have also been mindful of not boosting the economy through too much government spending as this could result in a growth rate that quickly hikes up inflation.

And while there is no expectation of significant change in key long-term economic policy, investors have welcomed the removal of uncertainty and the announcement of the upcoming regime change.

Renowned fund manager Anthony Bolton, who runs Fidelity China Special Situations, says: “China has its own challenges including a likely significant rise in bad debts at many banks and local finance vehicles. However, as I have argued previously, I believe China has ample resources at the centre to tackle these issues.

“I remain less concerned about these financial challenges; rather, I think the main issues ahead for China are related to the need for longer term social and political change. I think we will need to watch closely what reforms are introduced over the next year to see the true colours of the new regime.”

He points to several risks including China’s deteriorating relationship with its neighbours, especially Japan, and potential friction between North and South Korea.

However, despite these risks, he believes 2013 could surprise investors on the upside.

The key factor is that, although overall for Asia, falling demand from developed countries is keeping growth flat, the region should continue to grow at a more attractive pace than many other parts of the world, driven particularly by demand from its growing middle classes, its cheap, young workforce and its attractive business environment.

Danny Cox from Hargreaves Lansdown says people investing for the longer term could benefit from selecting a Asia Pacific fund.

He says: “A balanced portfolio will have UK funds and for the right investorsome Asia Pacific funds to provide some diversity and investment in areas of opportunity. You might see better growth in Asia Pacific over the new few years than you would in the UK, but that is because their GDPs are much higher and their prospects for catching up to the developed world are much higher.

“If you are looking to invest for the next 5-10 years, you should have half of your portfolio in the UK and then additionally get risk through specialist funds and smaller companies. If you are looking at 10 years plus, then you might have a bit more exposure overseas to places like Asia Pacific.

“But also don’t forget that Europe is pretty cheap at the moment, albeit we have the potential for eurozone problems. There are lots of places in the world you can look for growth, but the further overseas you look from the UK shores the longer term you need to look to preserve yourself from volatility.”

DIY investors looking for exposure to Asia Pacific funds can do so via execution-only brokers who will generally charge a small fee to maintain their portfolio. Investors need to consider the difference in the fees and charges that different brokers will charge.

Looking at transaction charges to trade funds is important – some providers charge these, others don’t, and these could eat into an investment.

Most brokers will have online tools and resources available to help DIY investors research their funds.