It is easy not to believe in a Chinese recovery. All indicators suggest the economy is in big trouble. Freight volumes and energy consumption are in negative territory and anyone with mining stocks knows that demand for commodities has stalled.

However, Dale Nicholls, manager of the Fidelity Special Situations fund believes there are also key indications suggesting that even though the economy is slowing, the stock market is set to rise.

He believes that investors should make the distinction between the old economy and the new economy which, with the services sector looking good, retail sales up, including e-commerce, the consumption story is strong.

The economic slowdown will hurt the stock market if you are exposed to the old economy companies such as steel, chemicals and construction. He prefers companies centered on the new economy such as IT stocks, fabric suppliers, alternative energy, telecoms and disruptive technology. He prefers private companies to state owned enterprises (SOEs), although he has made an exception for CITIC Telecom, which owns 35,000 metres of fibre optic cable throughout China and which has great potential.

There is unlikely to be a crisis similar to 2008 because there are lots of deposits in the banks with Chinese people, arguably saving too much. Corporate governance is a challenge, but that is true of all emerging market investing.

There are areas of the market which are strongly declining that pull down the whole market. But China is as cheap as it was in the depths of the global recession, even taking out the energy and banking stocks.

Chinese bank stocks are to be avoided as debt has doubled in recent years and bad debts are to be expected as the debt unravels. Consumption will remain strong and is a big consideration for those investing in China. As the burgeoning middle class emerges, China will be the biggest economy in the world by 2020.

Currently, China makes up about 13% of global GDP but only 3% of global markets. Investing in China may now be compelling based on valuations, which are very low and on growth potential, which is high.