A new report from VanEck has highlighted that while geopolitical tensions rattle global markets, China's onshore equities are showing resilience.
According to Alice Shen, Portfolio Manager, Vaneck, during global geopolitical conflict, countries that rely heavily on imported energy can be particularly exposed.
This is due to rising oil prices trickling through to inflation and production, and negatively impacting economic growth expectations.
However, China's onshore equity market has shown relative resilience.
During the recent oil price spike following tensions in the Middle East, the CSI 300 Index, the benchmark for China's A-share market, experienced comparatively modest moves relative to many global equity markets.
She said there are two structural factors that may help explain this resilience.
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Energy strategy
According to the report, China has spent years pursuing a more diversified energy strategy. This may be helping cushion the impact of oil market shocks.
VanEck said strategic oil reserves have been steadily built up since last year. This has helped reduce the immediate sensitivity of the economy to supply disruptions.
While coal remains the dominant source of energy, China has also been increasing its renewable energy capacity for many years.
According to the International Energy Agency, IEA, China accounted for roughly 40% of global renewable capacity expansion between 2019 and 2024. Enhance competitiveness of both solar and onshore wind energy generation, combined with improvements in energy storage and system integration, is gradually broadening the country's energy base.
Diversification and defence potential
VanEck also noted that while China A-shares are not traditionally viewed as a defensive asset class, recent market behaviour has highlighted how domestic policy drivers and structural economic trends can sometimes decouple the market from global macro shocks.
The report also highlighted that at the country's latest Two Sessions meeting, it pointed towards moderate and "quality growth." This is set to be driven by domestic demand, technological self-reliance, and structural transformation rather than aggressive stimulus.
How to gain exposure with ASX ETFs
For investors optimistic on the long-term prospects of Chinese equities, there are plenty of ASX ETFs to consider.
Three notable options include:
- VanEck China New Economy ETF (ASX: CNEW) – Invests in 120 fundamentally sound and attractively valued companies with growth prospects in China's New Economy, targeting technology, healthcare, and consumer staples and consumer discretionary sectors.
- VanEck Ftse China A50 ETF (ASX: CETF) – Invests in a diversified portfolio comprising the 50 largest companies in the mainland (A-shares) Chinese market
- iShares International Equity ETFs – iShares China Large-Cap ETF (ASX: IZZ).
Other ASX ETFs with Chinese exposure include:
- Betashares Capital Ltd – Asia Technology Tigers Etf (ASX: ASIA) – Targets the 50 largest technology and online retail stocks in Asia (ex-Japan).
- VanEck Msci Multifactor Emerging Markets Equity ETF (ASX: EMKT) – Invests in a diversified portfolio of emerging market companies with value, low size, momentum and quality characteristics. Approximately 25% of the fund is currently allocated to China.
