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Discover China’s most compelling long-term structural growth themes
Accessing China’s Growth through Thematic Investing
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7 investment themes that are transforming China
Building Your Portfolio for Long-Term Growth: An Introduction to Thematic Investing
Thematic investing aims to identify long-term macro trends that have the power to transform China and the wider world. These trends can include new and innovative technologies that are disrupting long-established industries and markets, demographic shifts that are giving rise to new consumer tastes and needs, and challenges emanating from environmental and resources issues. By anticipating these trends from an early stage, seeking out the best quality Chinese companies that will benefit most from these trends, and by maintaining long-term investment exposure to these companies, investors can achieve compelling and sustainable long-term growth. The thematic approach is agnostic to any particular sector, market capitalization or style bias, which means that it can provide portfolio diversification and low correlations to other investment approaches.
Benefits of Thematic Investing
Benefits
Characteristics
Thematic investing refers to the process of identifying macro-level trends and the underlying investments that stand to benefit from the materialization of those trends.
What is Thematic Investing?
China is undergoing a generational transformation to becoming a country that is driven by innovative, hi-tech industries. Benefitting from government support and a highly educated workforce, homegrown companies specializing in disruptive, next-generation technologies are driving the next wave of China’s economic growth and leading the country towards the path to IT self-sufficiency. The economy is also undergoing a massive shift away from export and manufacturing-driven growth towards high value consumption and services, which is being fueled by China’s fast-expanding affluent middle class and their rising disposable incomes and consumption expenditure. Finally, China’s focus on environmental protection and its commitment to building an ‘ecological civilization’ is underpinning extraordinary levels of investment into renewable industries and other environmental industries. In short, there are huge structural transformations taking place in China today, which are opening up new opportunities for thematic investment.
Cloud computing is revolutionizing the way people work, transforming how governments and businesses manage data and provide services, and is supporting innovations such as smart cities, autonomous vehicles and artificial intelligence. By enabling data, software and other IT resources to be available anywhere at anytime, the cloud has made computing cheaper and more accessible than ever before. The era of cloud computing in China is gradually taking off and, bolstered by government support and leadership from some of China’s most innovative and well-resourced IT companies, adoption rates are expected to grow rapidly. As China increasingly becomes a digital and data-driven society, the power of cloud computing will enhance operating efficiencies for both the private and public sector and advance the country’s competitive advantage in areas such as automation and data analytics.
Cloud Computing
A new generation of homegrown innovative biotechnology companies is revolutionizing healthcare in China. By harnessing groundbreaking technology to manufacture drugs from biological substances, these companies are pushing the boundaries of medical science. As China deals with the burden of a rapidly aging society, increased healthcare spending requirements and rising levels of chronic, non-communicable diseases, the government made biotechnology one of its strategic industries and provided significant investment and policy support. Today, China’s biotech market is the world’s fastest growing and is buttressed by a rich ecosystem of world beating research talent, well-funded entrepreneurs and a system of patents and regulations that is rapidly catching up to global standards.
BIOTECHNOLOGY
China is undergoing a secular consumption boom. Driven by rising household incomes and growing ranks of the affluent middle class, consumption has become the biggest driver of the China economy. As the country becomes richer and gives rise to a new crop of young consumers, its consumer tastes and needs are rapidly evolving. Tech-savvy millennials have become the country’s most influential consumer segment and will contribute over 50% of total urban consumption. Furthermore, China’s spenders increasingly prioritize experiences over ownership, which has led to services such as education, travel and entertainment now accounting for 30% of the country’s total consumption. A new generation of high-end homegrown brands operating in various consumer-related industries are emerging to cater to the country’s brand conscious, aspirational and sophisticated consumers.
CONSUMER BRAND
China has embraced the electric vehicle revolution with zeal as it strives to battle air pollution, reduce its reliance on imported oil and find new uncontested ground to compete against global car manufacturers. Although electric vehicles are still far from entering the mainstream, China has carved out a leadership position and has become the world’s largest electric vehicle market. Furthermore, China has nurtured global industry champions in every part of the electric vehicle supply chain from innovative battery manufacturers to leading producers of battery minerals. As technological advancements continue making electric vehicles cheaper, more efficient and easier to charge, China is set to dominate the electric future of motoring.
ELECTRIC VEHICLES
Spurred by rapid advances in technological innovation and public investment, China is driving major transformations in energy. One of its goals is to reduce its heavy reliance on coal, which currently accounts for 60% of its overall energy consumption. With 30% of the world’s total carbon emissions coming from China, and as it battles serious air pollution problems affecting its major cities, the country is shifting from fossil fuels to renewables with profound urgency. Already China’s companies are global leaders in terms of renewables-related innovation and technology, and the country is the world’s largest manufacturer, exporter and installer of solar panels and wind turbines. As the cost of renewables continues to fall, clean energy sources such as solar, wind, hydro and nuclear are likely to become the mainstream globally and China will be at the forefront of this transformation.
CLEAN ENERGY
Long-term growth-focused investment strategy.
Unconstrained to a
particular sector or industry.
Can target social or environmental issues.
Long-term growth-focused investment strategy.
Generate long-term alpha.
Achieve portfolio diversification.
Support ESG-driven themes such as renewable energy.
A
b
c
A
b
c
Why China Thematic ETFs?
Megatrends in China
Transformational Impact
High Conviction
Themes
- Highly educated talent pool driving innovation in hi-tech industries
- Transforming into innovation-driven and data-rich society
- Government’s nurturing of strategic industries in push for global leadership
- Accelerating adoption of renewable energy and electric vehicles (EVs)
- Rise of domestic brands and increasing focus on experience-led consumerism
- Biotech
- Cloud Computing
- Clean Energy
- National ambition & endeavour for self-sufficiency
- Rising affluent middle class & demographic shifts
- Resource scarcity and pollution
China Thematic Growth ETFs
Cost Efficient
Transparent
Long-term Alpha Generators
Cloud Computing
Clean Energy
Consumer Brand
BIOTECHNOLOGY
ELECTRIC VEHICLES
Tap each icon to learn more
Hover to reveal more
- Human capital upgrade
- Technological breakthroughs
- Electric Vehicle
- Consumer Brand
Learn more
Learn more
Learn more
Learn more
Learn more
Cloud computing is revolutionizing the way people work, transforming how governments and businesses manage data and provide services, and is supporting innovations such as smart cities, autonomous vehicles and artificial intelligence. By enabling data, software and other IT resources to be available anywhere at anytime, the cloud has made computing cheaper and more accessible than ever before. The era of cloud computing in China is gradually taking off and, bolstered by government support and leadership from some of China’s most innovative and well-resourced IT companies, adoption rates are expected to grow rapidly. As China increasingly becomes a digital and data-driven society, the power of cloud computing will enhance operating efficiencies for both the private and public sector and advance the country’s competitive advantage in areas such as automation and data analytics.
Cloud
Learn more
A new generation of homegrown innovative biotechnology companies is revolutionizing healthcare in China. By harnessing groundbreaking technology to manufacture drugs from biological substances, these companies are pushing the boundaries of medical science. As China deals with the burden of a rapidly aging society, increased healthcare spending requirements and rising levels of chronic, non-communicable diseases, the government made biotechnology one of its strategic industries and provided significant investment and policy support. Today, China’s biotech market is the world’s fastest growing and is buttressed by a rich ecosystem of world beating research talent, well-funded entrepreneurs and a system of patents and regulations that is rapidly catching up to global standards.
BIOTECHNOLOGY
Learn more
Spurred by rapid advances in technological innovation and public investment, China is driving major transformations in energy. One of its goals is to reduce its heavy reliance on coal, which currently accounts for 60% of its overall energy consumption. With 30% of the world’s total carbon emissions coming from China, and as it battles serious air pollution problems affecting its major cities, the country is shifting from fossil fuels to renewables with profound urgency. Already China’s companies are global leaders in terms of renewables-related innovation and technology, and the country is the world’s largest manufacturer, exporter and installer of solar panels and wind turbines. As the cost of renewables continues to fall, clean energy sources such as solar, wind, hydro and nuclear are likely to become the mainstream globally and China will be at the forefront of this transformation.
CLEAN ENERGY
Learn more
Spurred by rapid advances in technological innovation and public investment, China is driving major transformations in energy. One of its goals is to reduce its heavy reliance on coal, which currently accounts for 60% of its overall energy consumption. With 30% of the world’s total carbon emissions coming from China, and as it battles serious air pollution problems affecting its major cities, the country is shifting from fossil fuels to renewables with profound urgency. Already China’s companies are global leaders in terms of renewables-related innovation and technology, and the country is the world’s largest manufacturer, exporter and installer of solar panels and wind turbines. As the cost of renewables continues to fall, clean energy sources such as solar, wind, hydro and nuclear are likely to become the mainstream globally and China will be at the forefront of this transformation.
CLEAN ENERGY
Learn more
Benefits
Generate long-term alpha.
A
Achieve portfolio diversification.
b
Support ESG-driven themes such as renewable energy.
c
Characteristics
Characteristics
350
300
250
200
150
50
0
100
RMB bn
Cloud market 2018-22E CAGR: 32%
2014
2015
2016
2017
2018
2019E
2020E
2021E
2022E
Public Cloud
Private Cloud
Source: Credit Suisse Report 2019
Public Cloud vs Private Cloud Growth
350
US$bn
300
250
200
150
50
100
0
2014
2018
2023F
Chemical Drug
TCM
Source: CLSA, Frost & Sullivan, PDB Database, Evaluate Pharma 2018
China's pharmaceutical market breakdown
Biologics
104.9
58.3
18.9
119.0
73.1
39.6
141.0
85.1
96.0
350
(US$BN)
300
250
200
150
50
100
0
2014
2018
2023F
104.9
58.3
18.9
119.0
73.1
39.6
141.0
85.1
96.0
Coal-fired
Source: NDRC, CLSA, 2019
Power Generation Mix in China 2019
64.1%
6.3%
17.6%
4.2%
5.2%
2.5%
1.8%
1.3%
3.1%
Other
Hydro
Nuclear
Wind
Solar
WTE and biomass
Gas fired
Residual temperature, gas, pressure
11.9
20.0
60.2
0.9
0.4
1.5
8.8
10.9
38.0
2.0
7.7
1.2
2010
2018
Breakdown of China’s Urban Households by Disposable Income*
Global (>390K)
Affluent (297-390K)
Mass Afflulent (197-297K)
Upper Aspirant (138-197K)
Aspirant (79-138K)
Lower Aspirant (49-79K)
Poor (<49K)
Middle Class
*2018 real RMB terms
Source: McKinsey Global Institute, 2019
30M
10M
0
China
Europe
U.S.
Source: Bloomberg New Energy Finance (forecast from 2018)
China’s Electric Vehicle Sales Surging Globally
20M
Rest of World
2015
2030
31.4
5.1
2010
11.9
20.0
60.2
0.9
1.5
0.4
8.8
10.9
38.0
2.0
7.7
1.2
2018
Breakdown of China’s Urban Households by Disposable Income*
Global (>390K)
Affluent (297-390K)
Mass Afflulent (197-297K)
Upper Aspirant (138-197K)
Aspirant (79-138K)
Lower Aspirant (49-79K)
Poor (<49K)
Middle Class
*2018 real RMB terms
Source: McKinsey Global Institute, 2019
7 investment themes that are transforming China
Benefits of Thematic Investing
Why China Thematic ETFs?
What is Thematic Investing?
Source: McKinsey Global Institute , 2019.
*2018 real RMB terms.
Find out more on the
Global X Hong Kong website
Contact us
English
Semiconductor
Robotics & AI
BIOTECHNOLOGY
ELECTRIC VEHICLES
In decades past, China’s vast workforce and low wages powered its meteoric rise as a manufacturing superpower and the world’s second largest economy. However, as the combined effects of an ageing population and rising labour costs continue to erode its competitive advantage, China is increasingly turning to robotics and artificial intelligence to bolster its future growth. Chosen by the government as
a strategic sector for increased investment, continued technological advances have led to dramatic falls in the cost of robots whilst performance gains and adoption by new industries have been on a consistent upwards trend. Although China is already the world’s largest market for industrial robots, the penetration rate measured by robot density remains low by global standards. Buttressed by supportive government policies and rapid improvements in innovation capability, the opportunities for a growing band of Chinese robotics firms are immense.
ROBOTICS & AI
Learn more
250
'000 units
25% Domestic share
300
250
200
150
50
100
0
2008
2009
2010
2013
2014
2015
2016
2017
2020*
Foreign manufacturers
Domestic manufacturers
Source: International Federation of Robotics (IFR).
*2020 are estimated figures are provided by IFR.
Proportion of Industrial Robots Sold In China Split By Domestic And Foreign Manufacturers
2011
2012
48% Domestic share
8
6
15
23
23
28
41
48
60
103
131
9
15
20
27
35
119
A transformational change is underway in China’s semiconductor industry. With China spending more on imported semiconductors than on oil (according to World Bank data released in 2016) and with the current trade war with the United States intensifying over key strategic technologies including semiconductors, China is determined to foster a self-sufficient and globally competitive domestic chip industry. Heavy spending on research and development, significant state subsidies, and a major recruitment drive to attract talent have helped the country’s homegrown chipmakers grow rapidly in recent years. As well as being a global leader in the manufacture of smartphones, PCs, servers and telecoms equipment, China is making bold strides in the development of next generation technologies such as robotics, internet of things, 5G and autonomous driving, which all depend on advanced chips as an essential technological component. China’s status as the world’s largest consumer of semiconductors is likely to continue yet, and China’s domestic companies are poised to benefit.
SEMICONDUCTOR
Learn more
Image Sensors
21%
15%
300
250
NAND
Smartphone Chipsets
RF Semis
Power Discrete
DRAM
0%
5%
10%
15%
20%
25%
2025E China Designed Market Share
2020E China Designed Market Share
Source: Gartner, company data, Morgan Stanley Research estimates
China Designed Semiconductor Market Share – 2020e vs. 2025e
MCU
Semi Equipment
Analog IC
PC/Server CPU
16%
2%
14%
12%
11%
6%
10%
5%
9%
1%
8%
4%
6%
2%
6%
3%
2%
0%
China has embraced the electric vehicle revolution with zeal as it strives to battle air pollution, reduce its reliance on imported oil and find new uncontested ground to compete against global car manufacturers. Although electric vehicles are still far from entering the mainstream, China has carved out a leadership position and has become the world’s largest electric vehicle market. Furthermore, China has nurtured global industry champions in every part of the electric vehicle supply chain from innovative battery manufacturers to leading producers of battery minerals. As technological advancements continue making electric vehicles cheaper, more efficient and easier to charge, China is set to dominate the electric future of motoring.
ELECTRIC VEHICLES
Foreign manufacturers
Domestic manufacturers
Source: International Federation of Robotics (IFR).
*2020 are estimated figures are provided by IFR.
Proportion of Industrial Robots Sold In China Split By Domestic And Foreign Manufacturers
Learn more
In decades past, China’s vast workforce and low wages powered its meteoric rise as a manufacturing superpower and the world’s second largest economy. However, as the combined effects of an ageing population and rising labour costs continue to erode its competitive advantage, China is increasingly turning to robotics and artificial intelligence to bolster its future growth. Chosen by the government as a strategic sector for increased investment, continued technological advances have led to dramatic falls in the cost of robots whilst performance gains and adoption by new industries have been on a consistent upwards trend. Although China is already the world’s largest market for industrial robots, the penetration rate measured by robot density remains low by global standards. Buttressed by supportive government policies and rapid improvements in innovation capability, the opportunities for a growing band of Chinese robotics firms are immense.
ROBOTICS & AI
2025E China Designed Market Share
2020E China Designed Market Share
Source: Gartner, company data, Morgan Stanley Research estimtes
China Designed Semiconductor Market Share – 2020e vs. 2025e
Learn more
PRIVACY POLICY
PRIVACY POLICY
- Semiconductor
- Robotics and AI
- Biotech
- Cloud Computing
- Electric Vehicle
- Consumer Brand
- Clean Energy
- Clean Energy
- Semiconductor