Regardless of one's feelings towards the current occupant of the White House, it's fair to say that the United States' historic role as the leader of the free world is at its lowest ebb since at least the end of the Second World War. With faith in the United States as a global leader waning, could investing in Chinese shares be a prudent move for ASX investors? If so, the iShares China Large- Cap ETF (ASX: IZZ) might be an easy way to do it.
For more than 70 years, the US has been at the centre of the global financial system. Even after the US-dictated 'Bretton-Woods' gold standard collapsed in the 1970s, the vast majority of world trade has, and continues to occur, in US dollars.
However, many investors are asking how long American dominance of the financial system will continue. US President Donald Trump has made no secret of his disdain for multilateral forums like NATO, the United Nations (UN), and the International Monetary Fund (IMF), viewing them through his 'America First' ideology as unnecessary drains on American resources.
If American power and influence on the international stage does decline, the logical heir, at least in many minds, is China.
China is the world's second-largest economy and has made no effort to hide its own superpower ambitions. China already dominates several future-facing industries, including electric vehicles, rare earths processing, and renewable energy.
So, is now the time to invest in China?
One of the easiest ways to do so from the ASX is through the iShares China Large-Cap ETF. This exchange-traded fund (ETF) holds a basket of 50 of the largest Chinese stocks. These stocks are dominated by China's largest tech titans, including Alibaba, Tencent, and Xiaomi. These companies currently make up 9.01%, 8.16%, and 7.97% of IZZ's portfolio, respectively. Other names that might be familiar to readers include carmaker BYD and food delivery giant Meituan.
If an ASX investor wishes to invest in China, this ETF provides one of the simplest paths.
Image source: Getty Images
Is IZZ a buy today?
This ASX ETF might prove to be a long-term winner for ASX investors, particularly if the US does continue to bleed power and influence to China.
However, I won't be buying it.
I happen to take Warren Buffett at his word when he tells us to 'never bet against America'. Sure, the America of 2026 is not the same America that most of us grew up with. However, I think this country's long history of innovation and open markets will continue to enable it to produce the best companies in the world. Plus, for all we know, the US could elect a very different President in 2028.
Right now, that is certainly the case. China may have some impressive companies. But none, at least in my view, can rival Apple, Microsoft, Nvidia, Amazon, Alphabet, Coca-Cola, Tesla, Netflix, and many, many others in terms of global reach and dominance.
China does not have the political polarisation of America. But it is also a country that coerces its companies to place loyalty to the Chinese state above its shareholders' interests, and to obey the central government's every whim. That's not something that many investors in Australia would welcome, I'd wager. It does not technically even allow non-citizens to directly own shares of Chinese companies (look it up).
As such, I would rather put my money in a country that values financial transparency and has always been the home of the world's best businesses. Its politics might be volatile. But the American financial system remains the central pillar of the global economy. As such, I'm listening to Uncle Warren on this one.
The iShares China Large- Cap ETF charges a management fee of 0.6% per annum. As of 31 March, it has returned an average of 5.63% per annum since its 2004 inception.
