We highlight three of the best China ETFs, as measured by 12-month returns, as of January 12, 2022. Learn more about the funds' performance, holdings, expenses, and Quant Ratings.
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What Is a China ETF & How Does It Work?
A China ETF is an exchange-traded fund that primarily invests in stocks of companies headquartered in China. China ETFs offer a means of geographically diversifying an investment portfolio while increasing investment exposure to the rapid growth of the Chinese economy.
There are 17 China ETFs that trade in the U.S. with at least $50 million in assets under management.
China's economy is the second largest in the world, as measured by Gross Domestic Product (GDP). Although several companies in China are state-owned, there are many whose stocks are publicly traded. Examples of Chinese stocks include:
- Alibaba (BABA)
- Tencent Holdings (OTCPK:TCEHY)
- NIO (NIO)
As an alternative to China ETFs, investors may gain exposure to Chinese stocks through broader international ETFs and mutual funds that invest in international stocks, specifically emerging markets ETFs.
Evaluating A China ETF
Performance: 1-year return is the primary selection criteria for evaluating performance on our list of China ETFs. Thus, by definition, the three ETFs in our selection are those with the three highest 1-year returns, through January 12, 2022. However, it is prudent that investors review 3-, 5-, and 10-year returns as well.
Expenses: When ETFs track the same index or commodity, the one with the lowest expense ratio will generally outperform those with higher expenses. Since the ETFs on our list do not all track the same index, the expense ratio is not the primary selection driver, albeit an important one.
Structure: ETFs are typically structured in one of three different ways: open-end funds, unit investment trusts, or grantor trusts. Most ETFs are structured as open-end funds, which are funds that allow investors to buy or sell shares during market hours.
Objective: All of the ETFs on our list seek to track the performance, less fees, of an underlying index of Chinese stocks.
Portfolio holdings: The ETFs on our list hold China stocks and may concentrate holdings in one ETF sector, such as energy or utilities, or within a range of market capitalization, such as small-, mid- or large-caps within the Chinese market.
- Quant ratings: Seeking Alpha's Quant Ratings and Factor Grades can be used in the evaluation of stocks and ETFs. In this article, we provide Factor Grades, which rate ETFs by five "factors" - Momentum, Expenses, Dividends, Risk, and Asset Flows. To do this, we compare the relevant metrics for the factor in question for the ETF to the same metrics for the other ETFs in its asset class. The factor is then assigned a grade, from A+ to F, instantly characterizing the strength or weakness of the metric compared to the asset class.
Note: To arrive at our list of best China ETFs by market performance, we used the Seeking Alpha ETF screener. We ignored leveraged and inverse ETFs, funds with less than $5 million in assets, and those that primarily invest in Taiwan or Hong Kong.
3 Best China ETFs by Market Performance
| Name & Ticker | 1-Year Performance |
| Global X MSCI China Energy ETF (CHIE) | 42.62% |
| Deutsche X-trackers Harvest CSI 500-A Shares Small Cap ETF (ASHS) | 18.38% |
| Global X MSCI China Industrials ETF (CHII) | 12.90% |
1. Global X MSCI China Energy ETF (CHIE)
Global X MSCI China Energy ETF is an exchange-traded fund that seeks to invest in large-, mid- and small-capitalization segments of the MSCI China Energy IMI Plus 10/50 Index by using a full replication technique.
- As of date: 01/12/2022
- Performance over One-Year (price): 42.65%
- Expense Ratio: 0.66%, or $66 annually for every $10,000 invested
- Annual Dividend Yield: 1.89
- Three-Month Average Daily Volume: 2,586
Global X MSCI China Energy ETF Performance
| 1-Year | 3-Year | 5-Year | 10-Year | |
| Global X MSCI China Energy ETF | 42.65% | 6.91% | 7.18% | 1.91% |
| MSCI China Energy IMI Plus 10/50 Index | 44.53% | 8.06% | 8.29% | 2.83% |
| S&P 500 Index | 23.96% | 23.53% | 17.44% | 15.87% |
The Global X MSCI China Energy ETF significantly outperformed the S&P 500 index for the trailing 1-year return, as of January 12, 2022. However, the 3-, 5-, and 10-year returns for CHIE significantly underperformed the S&P 500.
Investors considering an investment in CHIE should note that price fluctuations can be volatile and that the fund has only $11.57 million in assets, which is very small for an ETF. Thinly traded ETFs can present wider bid-ask spreads, which is generally disadvantageous to retail investors.
The value of a $10,000 investment in CHIE, 1 year and 3 years ago, would be (as of January 12, 2022):
- 1 year ago: $14,265
- 3 years ago: $12,219
Structure, Objective & Holdings
- Inception Date: 12/15/2009
- Issuer: Global X Funds
- Ticker: CHIE
- Primary Exchange: NYSE Arca
- Benchmark Index: MSCI China Energy IMI Plus 10/50 Index
- Objective: Seeks to track the performance, less fees, of the MSCI China Energy IMI Plus 10/50 Index
- Structure: Open-end fund
- Holdings: 21 stocks of companies in the Chinese energy sector.
Seeking Alpha Quant Rating Grades
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| A+ | D | F | D- | A+ |
2. Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF (ASHS)
X-trackers Harvest CSI 500 China-A Shares Small-Cap ETF is an exchange-traded fund that seeks to track the performance, less fees, of the CSI 500 Index. At $37.7 million in assets under management, ASHS is the largest of the three ETFs we feature in our top-performing China ETF list.
- As of date: 01/12/2022
- Performance over One-Year: 18.38%
- Expense Ratio: 0.65%, or $65 annually for every $10,000 invested
- Annual Dividend Yield: 0.77
- Three-Month Average Daily Volume: 11,538
X-trackers Harvest CSI 500 China-A Shares Small Cap ETF Performance
| 1-Year | 3-Year | 5-Year | 10-Year | |
| X-trackers Harvest CSI 500 China-A Shares Small Cap ETF | 18.38% | 23.56% | 5.46% | NA |
| CSI 500 Index | 20.06% | 25.29% | 6.20% | NA |
| S&P 500 Index | 23.96% | 23.53% | 17.44% | 15.87% |
X-trackers Harvest CSI 500 China-A Shares Small Cap ETF underperforms the S&P 500 index for the last 1-year and 5-year periods, but the ASHS ETF edges out the S&P 500 for the last 3-year period. ASHS has not been on the market long enough to have a 10-year return.
The value of a $10,000 investment in ASHS, 1 year and 3 years ago, would be (as of January 12, 2022):
- 1 year ago: $11,838
- 3 years ago: $18,864
ASHS Structure, Objective & Holdings
- Inception Date: 05/21/2014
- Issuer: Deutsche Bank AG
- Ticker: ASHS
- Primary Exchange: NYSE Arca
- Benchmark Index: CSI 500 Index
- Objective: Seeks to track the performance, less fees, of the CSI 500 Index
- Structure: Open-end fund
- Holdings: 504 small-cap companies listed on the Shanghai and Shenzhen stock exchanges
Seeking Alpha Quant Rating Grades
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| B- | B- | D- | D+ | C+ |
3. Global X MSCI China Industrials ETF (CHII)
Global X MSCI China Industrials ETF is an exchange-traded fund that seeks to invest in large- and mid-cap segments of the MSCI China Industrials 10/50 Index by using a full replication technique. CHII was formed on November 30, 2009 and is domiciled in the United States.
- As of date: 01/12/2022
- Performance over One-Year (price): 12.90%
- Expense Ratio: 0.60%, or $60 annually for every $10,000 invested
- Annual Dividend Yield: 0.86
- Three-Month Average Daily Volume: 408
Global X MSCI China Industrials ETF Performance
| 1-Year | 3-Year | 5-Year | 10-Year | |
| Global X MSCI China Industrials ETF | 12.90% | 9.96% | 8.97% | 6.77% |
| MSCI China Utilities 10/50 Index | 12.15% | 10.28% | 8.36% | 7.21% |
| S&P 500 Index | 23.96% | 23.53% | 17.44% | 15.87% |
The Global X MSCI China Industrials ETF significantly underperformed the S&P 500 index for the trailing returns in all periods we reviewed, as of January 12, 2022. Investors considering an investment in CHII should note that price fluctuations can be volatile and that the fund has only $18.59 million in assets, which is extremely small for an ETF. Thinly traded ETFs can present wider bid-ask spreads, which is generally disadvantageous to a retail investor.
The value of a $10,000 investment in CHII, 1 year and 3 years ago, would be (as of January 12, 2022):
- 1 year ago: $12,190
- 3 years ago: $13,295
CHII Structure, Objective & Holdings
- Inception Date: 11/30/2009
- Issuer: Global X Funds
- Ticker: CHII
- Primary Exchange: NYSE Arca
- Benchmark Index: MSCI China Industrials 10/50 Index
- Objective: Seeks to track the performance, less fees, of the MSCI China Industrials 10/50 Index
- Structure: Open-end fund
- Holdings: 102 stocks of companies in the Chinese industrials sector.
Seeking Alpha Quant Rating Grades
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| D+ | D | F | D+ | A+ |
Bottom Line
With a China ETF, an investor can gain exposure to the second-largest economy in the world, while diversifying a portfolio into another geographic region. Investors should keep in mind that China ETFs can see greater price fluctuations, partly due to the increased geopolitical risk of investing in emerging markets.