chinese president xi jinping outlined a longterm plan to bolster the country’s middle class and tackle social inequality signaling a shift from focusing on corporate profitability to social good that calls for investors to reassess their china playbook but it doesn’t necessarily spoil the outlook for emerging markets chinese stocks have already been roiled by a raft of regulation and political intervention in the past few months with the ishares msci china etf mchi down 18 so far this year meanwhile the ishares msci emerging markets ex china etf emxc is up 55 so far this year xi outlined his longterm plan last week the plan emphasizes mixed ownership—keeping a big role for state control and stateowned enterprise while also attracting private capital reforming the tax code to redistribute wealth censorship a focus on reducing the urban versus rural gap and establishing property rights write bca strategists in a note to clients the most important part of the plan bolstering the size and wellbeing of the middle class increased political intervention and redistribution policies rarely sit well with investors and bca strategists said the plan underscores their view that the political risk in china is bigger than it might look in part because of problems like inequality and weak governance the strategists say the government may roll out subsidies to households and key industries and will be intent on not letting the plan derail its postcovid economic recovery that could mean more policies to stimulate the economy and ease policy though chinese corporate earnings—and investors—may not get too much relief as they continue to grapple with the shift toward antibusiness policies and uncertainty but the volatility and confusion looks like opportunity to some emerging market strategists because it could let other countries that have been stuck in china’s shadows get some attention that’s especially true for emerging markets that can benefit from rising commodity prices which should get a boost as global policy makers—including those in china—put forth more policies to help their economic recoveries in a note to clients goldman sachs ’ caesar maasry says china volatility may not spill over into broader emerging markets as long as it’s due to domestic regulations and not broader growth concerns indeed the divergence from china and the rest of emerging markets is a first in recent history with maasry noting emerging market equities outside of north asia are aided by corporate profits staging a vshaped recovery bank of america strategist jure jeric makes a similar case for emerging markets also in a note to clients pointing out that when chinese stocks “cough” because of unexpected regulatory shifts emerging markets can actually get a lift as investors moving out of china look for other places for their money plus the msci emerging markets index is nearing 20year lows versus the sp 500 and strategists are bullish on europe the middle east and africa and the middle east—particularly russia south africa and financial stocks in central eastern europe as policy makers try to help the global economic recovery gain traction the divergent views for different segments of emerging markets is the latest reason grouping all developing countries into the same bucket can lead investors astray it also is a reason to think carefully about how investors are tapping emerging markets since doing it through funds tied to the emerging markets index means more than a third of assets are allocated to china