Hedge funds are treating the Chinese markets with awe and fear due to uncertainty over the successfulness of government policy.

Hedge funds are treating the Chinese markets with awe and fear due to uncertainty over the successfulness of government policy.

Gigi Chan, manager of the Threadneedle China Opportunities Fund, stated that the country's exchange rate policy is its tool to try and re-engineer its growth profile into domestic consumption.

He said that much of the concern in the markets is over whether the tightening of the country's authorities will negatively impact on its economic growth and demand for foreign goods.

"Our base case is for inflation to pick up moderately, as non-food inflation looks to remain subdued given that the manufacturing sector in China is still in oversupply," he asserted.

Mr Chan suggested that this may not be a major problem, as the government is likely to roll out policy to try and address this issue.

Earlier this month, BlackRock predicted that exports, resilient consumer spending and strong corporate earnings would draw hedge fund managers' eyes to Asia during the new year.