(July 31): It is hoped that the inclusion of China A-shares in the MSCI Emerging Markets Index will lift the quality of analysis of the Chinese market and economy. Current analysis swings between the wildly optimistic and the dangerously pessimistic. We tend to talk of China as if it is a single uniform entity when the reality is very different.

Applying one aggregate average GDP number is as useful as applying a single GDP number to Europe. On average, the number would be accurate, but the average conceals too many vital details. A single European GDP figure does not allow for intelligent distinction between the German economy and the Greek economy, although clearly we would be happier investing in Germany than in Greece.

China is about the same geographical size as Europe and has even more diverse geography, climate and dialects. With more than twice the population of Europe, it has regions and regional governments as big as European sovereign governments. Applying a single 6.9% GDP figure to China is not particularly helpful from an investment perspective. Combine this with general statements about the state of the Chinese economy with a housing and credit bubble and the risk, or reward, equation becomes distorted.

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