How to Get Exposure to Chinese Stocks: Comparison of the Main China-themed ETFs

Overview:

TradingKey - It seems like Chinese equities are back in fashion. It all started in late 2024 with the government announcing a series of stimulus policies and then we had the DeepSeek moment in the beginning of the year putting the country on the AI map. Now, as of the end of Q3, we are already having one of the strongest rallies of the year.  As of September 29, 2025, the onshore CSI 300 Index stood at 21% year-to-date; Hong Kong's Hang Seng Index is 37% and the NASDAQ Golden Dragon China is 31%.

For the rally, equally as important as the policy support and the AI development are the attractive valuations – a result of years of underperformance, widening the gap between Chinese and Global peers.

Chinese Equity Market Outlook

As an investor who will probably see these returns for the first time, you might feel sad that you missed the train, but I have good news for you!

The outlook for 2025 remains constructive, with analysts like Goldman Sachs and Nomura maintaining overweight ratings on Chinese equities, citing double-digit growth potential.

First of all, valuations are still attractive even after the rally, especially if we compare them with the rest of the MSCI Index.

Source: LSEG, Capital Economics

Secondly, the stimulus policy will start to be reflected in the corporate earnings - rate cuts, stock stabilization funds.  Currently, Chinese households hold domestic savings in the amount of $22 trillion. For context, the approximate market cap of both onshore and offshore Chinese equities is around $15 trillion. With low interest rates, a portion of these savings will imminently flow into stocks and this can bring a massive impact in the market cap of the stocks. How much of this $22 billion may flow to stocks remains uncertain, but it helps us understand the massive amount of the savings.

Thirdly, the adoption of AI in China is rapidly catching up with the US. Companies like BABA and BIDU are a fraction of the valuations of their peers like AMZN, GOOGL and META, but with a lot of potential to enhance their AI capabilities.

For instance, BABA, Tencent and BIDU have already amassed similar amounts of data to the American peers. Also, the electrical network of China is newer and more robust, and most importantly cheaper, perfectly able to support the Chinese AI ambitions. 

Also, a lot of institutional investors are still in wait-and-see mode, and as the sentiment improves, more institutional money will flow in.

Overall, we might still be in the very early stage of a multi-year bull cycle.

So Why ETFs but not Individual Stocks?

First of all, we have the benefit of diversification. Chinese stock universe is big with many companies, and oftentimes its time-consuming to analyze each company one by one. Thus, we can use ETFs to get the desired exposure to the Chinese market and also minimize the risks associated with each individual stock.

ETFs provide diversification and liquidity. Unlike direct stocks, ETFs handle currency conversions and compliance, reducing operational hurdles.

List of Famous China-themed ETFs

Investors can get exposure to the Chinese market with the following ETFs.

· KraneShares CSI China Internet ETF (KWEB)

· Invesco Golden Dragon China ETF (PGJ)

· Direxion Daily FTSE China Bull 3X Shares (YINN) – the only leveraged ETF in the group

· iShares China Large-Cap ETF (FXI)

· SPDR S&P China ETF (GXC)

However, just like stocks, no two ETFs are the same:

Coverage

Firstly, there is a difference on which class of equities, these ETFs are covering. PGJ as tracking Golden Dragon China Index is focusing entirely on US-listed ADRs of Chinese companies. YINN and FXI are focusing on HK-listed H-shares, while KWEB covers both ADRs and H-shares (the overseas listings) and GXC is the broadest covering both overseas and A-shares.

Industry Exposure

In terms of industry exposure, there is also a divergence. The H-shares-dominated ETFs like YINN and FXI are more heavy on financial stocks, which is not surprising, considering the large Chinese banks are all listed in Hong Kong, with financials being 30-40% of their respective portfolios. KWEB and PGJ are ADR-focused and naturally they are skewed towards tech, e-commerce and internet stocks (50%+). GXC is the broadest in terms of exposure with consumer discretionary, having the largest share but with just 26% of the total portfolio.

Largest Individual Holdings

However, if we zoom out from the industry weights and focus on the top individual holdings of the five ETFs (as of late September 2025), the picture looks the following:

● KWEB: Alibaba (11%), Tencent (10%), PDD Holdings (~7%).

● PGJ: Alibaba ADR (9%), Baidu ADR (8%), JD.com ADR (~7%).

● YINN: Leveraged basket; top underlying: Tencent, Alibaba, China Construction Bank.

● FXI: Meituan, Alibaba, Tencent, China Construction Bank, JD.com.

● GXC: Tencent (13%), Alibaba (10%), Xiaomi (3%), PDD (3%), China Construction Bank (~2%).

There are few patterns we can observe: The tech giants Alibaba (BABA) and Tencent (TCNY) are among the top holdings in each of the five ETFs. Other e-commerce players like JD, Meituan and PDD are also quite common. Baidu and Xiaomi are more of a specialised players while China Construction Bank seems like the most preferred financial stock.

Performance

For the first nine months, the performance of each of the ETFs is more than impressive, far outpacing S&P500.

Source: TradingView

● KWEB: 46.27% (tech rally leader).

● PGJ: 29.03% (growth focus lags broader market).

● YINN: 105.57% (leveraged amplification, but volatile; up from flat in early Sept).

● FXI: 37.64% (strong large-cap gains).

● GXC: 40.99% (steady broad exposure).

Unsurprisingly, the leader in terms of performance is YINN due to its triple leverage which magnifies the upside potential (but the downside also). KWEB also does well due to its higher exposure to tech stocks.

Expense Ratio

As ETFs are essentially funds, they all come with expense ratio which includes management fees. The expense ratios of the five China-focused ETFs is the following:

KWEB: 0.76%

PGJ: 0.70%

YINN: 1.36%

FXI: 0.74%

GXC: 0.59%

Among these names, YINN is the only one that is leveraged, hence having the highest expense ratio. The expense includes the borrowing costs from the leverage. Also this ETF utilizes more complex financial instruments like swaps and futures, increasing the costs of managing. GXC is the cheapest here because it passively tracks the S&P China BMI Index.

Risk-adjusted Return

As we discussed the return above, it is also important to see the risk-adjusted return of the ETFs. Thus we use sharpe ratio to see which one has generated the biggest excessive return per unit of risk.

KWEB: 0.79 (~32.5% volatility)

PGJ: 1.09 (~32.5% volatility)

YINN: 0.79 (~65% volatility)

FXI: 1.11 (~27.5% volatility)

GXC: 1.36 (~22.5% volatility)

GXC has by far the highest sharpe ratio mostly due to the lower volatility as the index is perhaps the broadest (volatility spread across industries). On the opposite end we have YINN, despite the highest return, the ETF takes significant more risk with the leverage, lowering the overall Sharpe ratio.

AUM and liquidity

Size is another important aspect when looking at ETFs, the bigger the assets under management (AUM) are, the more liquid the ETF would be. Usually, an AUM of $1 billion or above is considered good, while those with lower AUM may face liquidity risks.

Among the five ETFs, KWEB has $8.5 billion AUM, making it the most liquid from the group. On the other hand, PGJ has just $139 million AUM.

Summary

Overall, despite the ETFs covering the same theme, there are quite a few differences.

YINN and FXI are more H-shares focused, while KWEB and PGJ are predominantly ADRs. PGJ and KWEB are also more heavy on tech while YINN and FXI are relatively heavy on financial stocks.

YINN is outperforming all the peers with 105% year-to-date return, but this is primarily due to the leverage. When it comes to risk adjusted returns, GXC is leading due to its more broader nature covering ADRs, H-shares and A-shares, thus spreading the volatility.

Here is a summary table below:

Overall, for risk-tolerant investors YINN provides the highest risk profile. For those who want the largest exposure to tech, KWEB has it. Finally, for the broadest exposure in terms of industry, it is the GXC.

Risks

Investing in ETFs usually comes with less risks than investing in individual stocks, however China-themed ETFs do bear some inherited macro risks. This includes sudden deterioration in the economic environment of the country – whether it is slowdown economic growth, currency fluctuations or inflation.

Also, the risks from the complex US-China relations are still quite significant and this can be potentially seen in higher tariffs, trade restrictions, sanctions towards companies or threat of delisting of Chinese companies from the US exchanges.