Best China ETFs for Spring 2022

These are the top performing China ETFs, which can provide U.S. investors with international diversification in their portfolios.
Mar 16, 2022
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Investors looking to diversify their portfolios geographically have a range of options, and getting into China — the world's second-largest economy — can be particularly appealing. If so, one route is to buy China exchange-traded funds.

What are China ETFs?

China ETFs are exchange-traded funds that track publicly listed Chinese companies and give investors exposure to Chinese markets without having to directly purchase those stocks. Instead, the issuing company purchases the underlying asset (such as stocks, bonds or currency), and fund investors purchase shares in the fund. As the underlying assets rise and fall, so does the value of your fund investment.

Researchers say investors often suffer from “home bias” — the tendency to purchase domestic stocks for their portfolio. But U.S. stocks make up only about 56% of global equities. Exposure to international markets, especially a large player like China, gives investors the benefit of diversification as one region’s markets may rise while others fall.

Investing in China ETFs carries risks, such as trade tensions with the U.S. and the aftermath of the coronavirus outbreak. Still, many investors are placing long-term bets on the world’s second-largest economy.

How to invest in China ETFs

Here’s how to buy shares in a China ETF:

Step 1: Find a China ETF

Search for China ETFs on your broker's website. (No broker? Here's how to open a brokerage account.)

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Step 2: Analyze the ETF

Some things to check before purchasing shares in a China ETF:

  • Type of China ETF. There are many China ETFs available to U.S. investors, including equity, fixed income and currency assets classes. Some focus on the total China market, while others focus on company size or a particular sector, such as technology, health care and real estate.

  • Expense ratio. This annual fee is paid out of your investments in the fund, so the lower the expense ratio, the better. The average expense ratio for China ETFs is 0.7%, according to ETF.com.

Important note: The average investor should avoid leveraged China ETFs, which use financial derivatives and borrowed cash to make predictions on future prices. The average investor also shouldn't consider China exchange-traded notes, or ETNs, which are secured debt obligations. Unlike ETFs, these funds don’t actually own the underlying asset and have a higher risk of default. These investments aren’t good for a buy-and-hold strategy favored by many investors saving for the long term.

Step 3: Buy the China ETF

You can purchase ETFs just like you’d buy a company stock — for both, you need an online brokerage account to buy and sell shares.

To see brokerages with a broad ETF selection, check out our full list of the best brokers for ETF investing.

Best-performing China ETFs

Below is our list of best-performing China equity ETFs. We've excluded China exchange-traded notes and leveraged China ETFs.

Name

Symbol

5-year return

Global X MSCI China Consumer Discretionary ETF

CHIQ

61.11%

iShares MSCI China A ETF

CNYA

56.36%

Global X MSCI China Energy ETF

CHIE

54.29%

Pacer CSOP FTSE China A50 ETF

AFTY

54.25%

WisdomTree China ex-State-Owned Enterprises Fund

CXSE

53.25%

Global X MSCI China Materials ETF

CHIM

50.19%

KraneShares Bosera MSCI China A 50 Connect Index ETF

KBA

47.19%

Xtrackers Harvest CSI 300 China A-Shares ETF

ASHR

42.41%

First Trust China AlphaDEX Fund

FCA

40.25%

KraneShares CICC China Leaders 100 Index ETF

KFYP

39.08%

Data is current as of March 10, 2022. Data is solely for informational purposes and not for trading purposes or advice.

Learn more about sector ETFs:

Disclosure: The author held no positions in the aforementioned investments at the original time of publication.

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