The potential of the Chinese internet market is breath-taking. China has relentless growth in the number of internet users, a massive e-commerce market and an ever-expanding middle class. Together, these make the Chinese internet sector one of the biggest investment opportunities.
China has already 914 mln internet users, the largest number in the world. That’s over 3x the users in the U.S. The penetration rate in China is only 65% while the U.S. 90% are already using the internet. So, once China reaches a similar penetration rate it will count about 1.3 bln internet users. China is already the world’s largest e-commerce market. More than half of global online transactions are made in China. Chinese e-commerce sales reached $737 bln in just the first half of 2020. In 2019, Amazon Prime Day resulted in over $5.8 billion in sales. Alibaba’s 2019 Singles Day generated $38 billion. That’s more than 6x the sales of Amazon.
The Chinese internet operates in a parallel universe where its content is closely monitored and managed by the governement. As a result, Chinese internet users do not have access to Google, Facebook or Amazon. Instead, the Chinese internet has homegrown versions of all the U.S. internet giants: Google (Baidu), Twitter (Sina Weibo), YouTube (Youku Tudou), eBay (Taobao) and Facebook (Renren).
U.S. internet giants failed in China. They failed because the Chinese government didn’t let them succeed.
Investing in the Chinese internet market is almost a no-brainer. But how to invest in Chinese internet stocks? By using ETFs.
The KraneShares CSI China Internet ETF invests in publicly traded Chinese companies that provide services similar to those offered by Google, Facebook, Twitter, eBay, Amazon and Netflix. Or try the CSI China ETF that provides diversified exposure to the Chinese e-commerce sector by holding 35 different internet stocks. And the Direxion Daily CSI China Internet Index Bull 2X Shares offers a double-leveraged investment, if you like it a bit riskier.
The internet boom will continue in China. That’s a no-brainer.
Sven Franssen