Investors ponder China's role in equity asset allocations

China's growing economic strength and improving market accessibility may potentially bring significant investment opportunities, as well as challenges, to global investors. Understanding China's role in equity allocation may be crucial to sound investment policy decisions.

Under a classic asset allocation framework, investors typically have two objectives in mind when investing in an asset class or segment. The first is to improve the expected return of the portfolio, while the second is to improve portfolio diversification.

As for the first objective, China's purchasing power overtook the United States in 2014 and is forecast to be 1.5 times the size of the US by 2024, according to the International Monetary Fund.