OVER the past decade, China has accounted for roughly a third of all global GDP growth, its middle class is now the largest in the world, and the economy and stock market are the second largest. Driven further by world-leading technology, continual innovation, and a middle class growing by tens of millions every year, there is so much more to come.

More importantly, the opportunities in the equity market are compelling. Our experience of China is that it is one of the most inefficient markets in Asia, partly as a result of the significant role played by retail investors who make up some 80 per cent of domestic trading volumes. Such participants often exhibit herd-like investment mentalities, with holding periods measured in days, not years.

At the stock level, China is where investors can find many of the world’s most innovative companies which offer up an array of promising growth opportunities.

You’ve probably heard of TikTok, the world’s most popular video app for teenagers with almost a billion users globally, which has transcended cultural and geographic boundaries and is owned by Bytedance. Bytedance’s core skill is in deploying artificial intelligence to predict the content that each member of its vast audience will be interested in. This skill-set should extend the opportunity well beyond its current products.

China is also revolutionising healthcare with Ping An Good Doctor, an online GP service, which has utilised artificial intelligence in such a way that a single Ping An doctor can review 500 patients a day, with double the accuracy of a physical doctor.

In online retail, Alibaba and JD.com have helped create the world’s biggest ecommerce market, larger than the next 10 countries’ markets combined.

Meanwhile, CATL, the world’s largest electric vehicle (EV) battery maker, has enabled China to account for nearly half the global EV market and is now one of the companies at the forefront of the transition to electric vehicle adoption.

The Chinese technology market demands companies are highly competitive and this often means a focus on mobile first to target consumers. Mobile is the biggest segment in the advertising market, and mobile payments accounted for around 83 per cent of all payments in 2018, according to Daxue Consulting.

Another characteristic of successful companies in China is how they’ve been battle hardened by growing up in a ruthlessly competitive market with thousands of copycats. To achieve scale they’ve had to fight tooth and claw to get there. Meituan Dianping, China's biggest food delivery app, delivers 20 million meals a day, and has half a million people doing deliveries. To put this context, in the US, Grubhub, one of the leaders in this market, delivers half a million meals a day.

Chinese companies also continue to ramp up their investments in research and development. The country already spends more on R&D than the whole of the EU, and is soon likely to overtake the USA. This, combined with the world’s largest middle class, whose appetite to consume and adopt technology is arguably growing faster than anywhere else in the world, indicates the strong likelihood that many of the world’s leading technology firms will be found in China over the coming decades.

It is perhaps surprising that, despite these attractions, China is significantly underrepresented in global portfolios: globally, China is 18 per cent of market cap, 30 per cent of listed stocks, but only 2.5 per cent of global funds’ allocations.

China has some of the most exciting and transformational growth companies in the world and investors who identify these could benefit from exceptional returns.

Roderick Snell and Sophie Earnshaw are co-managers of the Baillie Gifford China Growth Trust