Investing in China is something of a controversial topic. Over the past couple of years, China's relationships with both Australia and the United States have unquestionably deteriorated. Both China's political and economic models of governance remain controversial and as such, many Australians might be feeling uneasy about investing in China directly. Even so, China remains a fertile hunting ground for many investors. It's one of the fastest-growing economies among the emerging markets of the world, and its unique commercial landscape affords many interesting opportunities. So how does one easily invest in China and Chinese businesses from the comfort of Australia?
Well, I think the best way to do so is through exchange-traded funds (ETFs). Here are 2 ASX China EFTS that investors can choose from today for exposure to the Chinese market.
iShares China Large-Cap ETF (ASX: IZZ)
This ETF from iShares is our first ASX option. It holds 50 of the largest companies listed in mainland China with a simple weighting method based on pure market capitalisation. IZZ's 5 largest holdings include Meituan Dianping, Tencent Holdings, China Construction Bank, Xiaomi Corp and Ping An Insurance Group.
IZZ charges a management fee of 0.74% per annum, offers a trailing dividend distribution yield of 2.44% and has returned an average of 5.68% over the past 5 years.
VanEck Vectors China New Economy ETF (ASX: CNEW)
This ETF from VanEck is slightly different. It holds 120 companies and focuses on 'sound companies' with the 'best growth prospects' in the tech, healthcare, consumer staples and consumer discretionary sectors.
CNW's 5 largest holdings are as follows: Zhejiang Meida, UE Furniture Co, Guandong Biolight, Xiamen Jihong Technology and Shenzhen Kingkey Smart.
This ETF charges a management fee of 0.95% per annum, offers a trailing dividend distribution of 1.15% and has returned an average of 45.98% since its inception in November 2018. While that might look like a ridiculous return, it's worth noting that the index CNEW tracks has returned a tamer average of 12.76% per annum over the past 5 years.
Foolish takeaway
If I had to choose one of these ASX China EFTS, I would have to go with the latter option – the China New Economy ETF. Although it has a higher management fee at 0.95%, its performance and tilting toward the higher-growth side of the market offset this nicely in my view. While I wouldn't expect 45%+ returns every year going forward, I think this is a great ETF that would serve investors well in a portfolio today.
