• The Rising Middle Class and E-Commerce

The Rising Middle Class and E-Commerce (Photo : Getty Images)

China has just surpassed the United States as the world’s largest e-commerce or online commercial retail market based on value. The growth of the market is attributed mainly to China’s rising middle class.

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According to McKinsey data, the Chinese market is predicted to have a worth of $840 billion in 2010, almost twice than the estimated values for the U.S. for the same period. The growth rate of China’s e-commerce market is about four times than that of the U.S.

“With China's continued growth as a world leader in e-commerce, it may not come as a surprise that the top-performing China Region mutual fund or ETF for the trailing five-year period is a technology fund,” Guggenheim Investments Managing Director Ivy McLemore said in a document.

Several Chinese brands have benefited from the rapid growth and have gotten a boost onto the global stage. Tech companies, including Alibaba, Tencent Holdings and Baidu, are now becoming known to firms around the world.

A group of popular tech names is included in CQQQ’s portfolio. Among those that topped the list are Tencent with 10.8 percent, Alibaba with 9.5 percent, Netease with 7.4 percent, Baidu with 7.1 percent and AAC Technologies with 5.0 percent.

Though the China Tech ETF chiefly includes technology names, some names linked to e-commerce are also included in the fund. These names could take advantage of China’s rising middle class in the booming market, especially with the expansion of Internet infrastructure and with the growing dependence of users on their digital devices in meeting their needs.

The flagging of short-term political risks has also contributed to the growth of China’s e-commerce market. Traders have previously been troubled with U.S. President Donald Trump’s strong position on trade policy with China. Things have changed as Trump said that he became quick friends with Chinese President Xi Jinping during last week’s Mar-a-Lago Summit.

Furthermore, it is not likely for the U.S. to alienate its trade relations with China. The two countries have agreed to cooperate in dealing with the crisis in North Korea.

The Chinese e-commerce market will likely to stay in momentum with the political developments and with the continuous growth of China’s rising middle class.