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Right now, a typical institution holds just a 1.7 percent exposure to China, according to Malkiel, based on an average 10 percent exposure to emerging markets and China’s 17 percent chunk of the emerging markets pie.
Their overall exposure “should be at least 9 percent to better match China’s contribution to global GDP,” said Malkiel. “And that’s conservative. It really should be 12 percent.”
The economist, who is also chief investment officer at indexing firm AlphaShares, said the best way to capitalize on his China investment thesis is through Renminbi bonds or Chinese equities.
China’s stocks exploded higher this week after the government signaled there may be an end to monetary tightening. A European bailout plan on the table also soothed fears of slowing exports.
To be sure, not everyone is as enthusiastic as Malkiel. Detractors point to a build out in infrastructure to the center and West of the country that is taking place before a migration in the population. Not to mention rampant corruption and accounting practices.
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