3 ASX ETFs to target China’s long-term growth

These three ASX ETFs provide a relatively low-cost, diversified way to tap into China’s long-term growth story.

China’s economy remains the world’s second largest. And despite a choppy few years, it continues to grow at a pace that outstrips most developed markets. Policymakers are targeting consumption, advanced manufacturing, renewable energy and technology as the next engines of expansion.

For ASX investors wanting exposure to China without picking individual stocks, these three low-cost ASX ETFs offer a simple entry point.

iShares China Large-Cap ETF (ASX: IZZ)

This fund tracks the FTSE China 50 Index and provides exposure to 50 of the largest Chinese companies. Most of them are listed in Hong Kong.

Major holdings typically include Tencent Holdings Ltd (HKEX: 700), Alibaba Group Holding Ltd (HKEX: 9988) and China Construction Bank Corp. (SSE: 601939). These are dominant players in technology, e-commerce, financial services and consumer platforms.

The strength of IZZ lies in its focus on established giants that sit at the heart of China’s corporate landscape. Investors gain diversified exposure to market leaders with strong balance sheets and deep competitive advantages.

The flip side is concentration risk. Large technology and financial stocks can dominate returns, and regulatory crackdowns or geopolitical tensions can hit these names hard. Reporting standards and government influence also remain ongoing risks.

VanEck China New Economy ETF (ASX: CNEW)

This ASX ETF targets companies positioned to benefit from China’s shift toward innovation, healthcare, consumer brands and advanced technology.

Instead of old-economy state-owned banks and energy firms, investors gain access to areas such as biotech, electric vehicles, online services and premium consumer goods.

Holdings have included companies like BYD Company Ltd (SZSE: 002594), Contemporary Amperex Technology Co. (HKEX: 3750) and healthcare and technology innovators.

The key appeal of this ASX ETF is its alignment with structural growth themes. As China’s middle class expands and domestic consumption rises, these sectors could outpace traditional industries.

However, growth stocks can be volatile. Earnings expectations are often high, and policy changes affecting data security, gaming, education or healthcare can quickly dent valuations.

VanEck FTSE China A50 ETF (ASX: CETF)

A third fund worth a look is the VanEck FTSE China A50 ETF. This ASX ETF tracks the FTSE China A50 Index and invests in 50 of the largest companies listed on mainland exchanges in Shanghai and Shenzhen.

That means direct exposure to so-called A-shares. Top holdings commonly include Kweichow Moutai Co. Ltd (SSE: 600519), China Merchants Bank Co. Ltd (HKEX: 3968) and leading industrial or renewable energy names.

The advantage of CETF is its closer link to China’s domestic economy. A-shares often capture companies more focused on internal demand rather than offshore listings. This can provide diversification relative to Hong Kong-listed giants.

The risk, however, lies in sensitivity to domestic policy settings and liquidity conditions. Mainland markets can be more volatile, and foreign investor access rules can evolve over time.

Foolish Takeaway

All these ASX ETFs give investors the opportunity to enter China’s long-term growth story. Yet investors must factor in currency movements, regulatory shifts and geopolitical tensions before diving in.

For those comfortable with the risks, adding measured China exposure through an ASX-listed ETF could offer meaningful diversification and growth potential over the long haul.

The post 3 ASX ETFs to target China’s long-term growth appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.