7 Best China ETFs To Buy in Canada for September 2023

For Canadian investors, adding some international exposure can help diversify any investment portfolio. One way to achieve this is by adding assets that invest in China to gain access to the world’s second-largest economy.

China is the world’s largest industrial market, accounting for nearly 30% of the world’s total manufacturing output in 2022.

If you are unsure which Chinese companies to invest in, consider some of the best China ETFs in Canada to hold a basket of Chinese stocks.

Best China ETFs in Canada

1. iShares China Index ETF

Here are some key facts about this ETF:

• Ticker Symbol: XCH.TO
• Inception Date: January 21, 2010
• Assets Under Management: $104 million
• MER: 0.86%
• Distribution Yield: 0.73%
• Distribution Frequency: Semi-annual
• 1-Year Return: -21.05%

This ETF holds the 50 largest Chinese companies by market capitalization. Rather than holding individual stocks, XCH holds a 99.87% weight in the iShares China Large-Cap ETF (FXI) which is listed in the United States.

XCH is one of the best China ETFs in Canada and replicates the performance of the benchmark FTSE China 50 Index.

The five stocks with the largest holding allocations in this ETF are Tencent, Alibaba, Meituan, JD.Com, and China Construction Bank Corp H.

Related: Learn about iShares Canada ETF.

Buy ETFs Free on Questrade ($50 Trade Credit)

2. Vanguard FTSE Emerging Markets All Cap Index ETF

 Here are some key facts for this ETF:

• Ticker Symbol: VEE.TO
• Inception Date: November 30, 2011
• Assets Under Management: $1.5 billion
• MER: 0.24%
• Distribution Yield: 4.75%
• Distribution Frequency: Quarterly
• 1-Year Return: -10.83%

This Vanguard China ETF holds a basket of 5,577 different stocks from a basket of different emerging markets. There is a 28.9% allocation to Chinese stocks.

VEE also holds stocks from other emerging markets such as India, Taiwan, Brazil, and South Africa. It provides exposure to a total of 10 different international markets.

The five largest holdings in this fund are Taiwan Semiconductor Manufacturing Co. Ltd., Tencent Holdings Ltd., Alibaba Group Holding Ltd., Reliance Industries Ltd., and Infosys Ltd.

3. BMO MSCI China ESG Leaders Index ETF

Here are some key facts for this ETF:

• Ticker Symbol: ZCH.TO
• Inception Date: January 19, 2010
• Assets Under Management: $89 million
• MER: 0.67%
• Distribution Yield: 0.00%
• Distribution Frequency: Annually
• 1-Year Return: -37.09%

This BMO China ETF seeks to replicate the performance of the benchmark MSCI China ESG Leaders Index. It holds 159 different stocks with a focus on high ESG ratings.

The five largest holdings in ZCH are Tencent Holdings Ltd., Alibaba Group Holding Ltd., Meituan, China Construction Bank Corp, and Baidu Inc.

According to its MSCI ESG Fund Rating, ZCH has an A rating for ESG awareness and has a Moderate rating in terms of average carbon intensity.

4. Global X MSCI China Financials ETF

Here are some key facts about this ETF:

• Ticker Symbol: NYSEARCA:CHIX
• Inception Date: December 10, 2009
• Assets Under Management: $33 million
• MER: 0.65%
• Distribution Yield: 5.66%
• Distribution Frequency: Semi-annual
• 1-Year Return: -21.84%

This is the first US-domiciled China ETF on this list, and it is offered by Global X ETFs. CHIX trades on the NYSEARCA exchange in US dollars.

CHIX provides exposure to the financial industry in China. It holds 95 stocks of the largest banks and financial institutions in the Chinese markets. This results in a relatively high distribution yield at 5.66% semi-annually.

The five largest holdings in CHIX are Ping AN-H, China Construction Bank-H, Bank of China Ltd-H, Ind & Comm Bank of China-H, and China Merchants Bank-H.

5. iShares MSCI China Small-Cap ETF

Here are some key facts about this ETF:

• Ticker Symbol: NYSEARCA:ECNS
• Inception Date: September 28, 2010
• Assets Under Management: $71 million
• MER: 0.57%
• Distribution Yield: 4.80%
• Distribution Frequency: Semi-annual
• 1-Year Return: -39.68%

This iShares China ETF provides investors with exposure to 254 different small-cap, publicly traded Chinese companies. ECNS trades on the NYSEARCA exchange in US dollars.

ECNS has a 20.44% allocation to healthcare stocks, a 15.20% allocation to real estate stocks, and a 14.00% allocation to consumer discretionary stocks.

It is one of the only China ETFs in Canada that provides exposure to small-cap stocks that trade exclusively in China and are otherwise not easily accessible by Canadian investors.

6. Invesco China Technology ETF

Here are some key facts about this ETF:

• Ticker Symbol: NYSEARCA:CQQQ
• Inception Date: December 8, 2009
• Assets Under Management: $883 million
• MER: 0.70%
• Distribution Yield: -0.11%
• Distribution Frequency: Annual
• 1-Year Return: -38.58%

This Invesco China ETF tracks the benchmark FTSE China Incl A 25% Technology Capped Index. It is listed on the NYSEARCA index and trades in US dollars.

CQQQ focuses on Chinese technology companies with a 43.40% allocation to Information Technology stocks and a 34.97% allocation to Communication Services stocks.

The give largest weighted holdings in CQQQ are Tencent Holdings Ltd., Pinduoduo Inc ADR, Meituan, Baidu Inc, and Kuaishou Technology.

Related: Check our list of the top Canadian tech stocks.

Buy ETFs Free on Questrade ($50 Trade Credit)

7. SPDR S&P China ETF

Here are some key facts about this ETF:

• Ticker Symbol: NYSEARCA:GXC
• Inception Date: March 20, 2007
• Assets Under Management: $1.09 billion
• MER: 0.59%
• Distribution Yield: 1.93%
• Distribution Frequency: Quarterly
• 1-Year Return: -45.56%

This SPDR S&P China ETF is designed to track the performance of the S&P China BMI Index. The fund is a market-cap-weighted ETF that holds 950 different Chinese companies.

The largest weighted allocation is to the Consumer Discretionary sector, with 28.58% of the stocks in the fund. The second largest allocation is Financials, with 14.72%.

GXC’s largest holdings are some of China’s most familiar names, including Tencent Holdings Ltd., Alibaba Group Holding Ltd., Meituan Class B, China Construction Bank Corporation Class H, and JD.Com Inc. Sponsored ADR Class A.

How to Buy China ETFs in Canada in 2023

For Canadian investors who want to invest in the best China ETFs, discount brokerages offer lower or even zero-commission trades.

This means that over the long run, you keep more of your gains and pay much less in trading fees to the brokerage.

What are China ETFs?

China ETFs in Canada are funds that hold a basket of Chinese-based stocks. These can trade as ADRs or American Depository Receipts on a US exchange or directly in China or Hong Kong.

Investing in China ETFs provides exposure to the second-largest economy in the world and provides diversification from Canadian and American stocks.

These ETFs can track the total Chinese stock market or specific industries within the Chinese economy.

Are China ETFs a Good Investment?

Like with any regional investment, the performance will depend on the economic strength of that country. Investing in China adds significant international diversification to your portfolio in an economy that trails only the United States in size.

Chinese stocks have typically been seen as riskier because financial auditing and regulations are looser in China than in the United States.

Still, China is considered an emerging market, and many people project its economy to continue to grow into the future.

Downsides of China ETFs

One downside of investing in China ETFs is the government’s heavy influence and regulation over its domestic businesses.

The Chinese Communist Party rules with an iron fist in China and is generally seen as an unpredictable factor.

This was evident in 2022 when Chinese stocks produced one of their worst-performing years in history.

Top China Stocks

1. Tencent Holding Ltd. (HKG:0700)
2. Alibaba Group Holding Ltd -ADR (NYSE: BABA)
3. JD.Com Inc (NASDAQ: JD)
4. Pinduoduo Inc – ADR (NASDAQ: PDD)
5. Nio Inc – ADR (NYSE: NIO)
6. Meituan (HKG: 3690)
7. Baidu Inc (HKG: 9888)
8. XPeng Inc – ADR (NYSE: XPEV)
9. Li Auto Inc (NASDAQ: LI)
10. China Construction Bank Ord Shs A (SHA: 601939)

FAQs

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