China is gaining more and more of the trappings of capitalism with each passing year, but the center of the country’s economic establishment is still a Marxist influenced, centrally planned oligarchy. The country’s production is guided, as the Soviet Union was before it, by the tight restrictions of five year plans. In order to demonstrate the flexibility of the capitalist system, a new ETF seeks to use the success of those plans as its underlying index.
According to Lisa Barr over at Indexuniverse.com, Kraneshares, a China-focused ETF company is launching the CSI China Five Year Plan ETF which will follow companies that are set to directly benefit from China’s five year plans. The new Exchange Traded Fund could almost be called perverted.
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The Five Year Plan ETF can be seen, as it is by Ms. Barr, as a good indication of the way the world economy is going. China is becoming one of the most important conglomerates in the world economy and the ETF is widely gaining recognition as the most important innovations in the financial industry in decades. Kraneshares combines these trends, though the Five Year Plan ETF may be a step too far for some.
China is currently on its twelfth Five Year Plan (2011-2015) since it started the economic controls in 1953. The current plan focuses on agricultural modernization, urbanization, and technological innovation among other improvements. The underlying assets of the CSI China Five Year Plan ETF will be held in companies set to benefit from the plan, such as those in the agriculture industry.
The revolution will be commoditized
Just over twenty years ago communism and capitalism were presented to most of the world as two system at cross purposes. There could never be economic cooperation with the Soviet Union because its economy was fundamentally opposed to that of the United States. Relations with China in the twenty first century have taken the opposite tack, and the silliness of the CSI China Five Year Plan ETF is a testament to this.
Integration is the desired effect from economic dealings with China. American policy makers have tried to foster as many links as possible with the Chinese economy for strategic and economic reasons. The process has become so advanced that American investors now have an index that allows them to bet on that tool so fundamentally opposed to capitalism in the past, the Five Year Plan.