3 Investments to Consider as China’s Market Heats Up

Key Points

• Tariff uncertainty and geopolitical unease combined with Chinese government stimulus may have primed the Chinese equities market for continued growth after a strong 2024.
• Investors seeking access to this space might consider individual names, including tech giants such as JD.com or GDS Holdings.
• Another means of exposure is through China-focused ETFs, which provide diversification and a simplified portfolio management process. 

Investors in the United States may be more likely to consider the Chinese securities market in early 2025 than they have been in years, owing to the Trump administration's move toward reigniting a trade war with the second-largest global economy.

Given the uncertain tariff situation, the relationship between U.S. investors and Chinese stocks may be growing murkier. In February, President Trump added 10% in tariffs on Chinese goods, which China countered with tariffs on precious resources and car imports. With further tariff changes expected and broader geopolitical tensions at play, uncertainty remains high.

On the other hand, Chinese stocks as a group have fared better in the last few months than they did in the several months prior to that. The CSI 300, which tracks the top 300 stocks on the Shanghai and Shenzhen exchanges, is up 9.5% over the past year but has remained largely flat since mid-October 2024, as of March 10, 2025.

More broadly, the MSCI China Index, representing the vast majority of large- and mid-cap Chinese firms, has returned an impressive 47%. Both indices saw a boost when the Chinese government's recent stimulus measures took effect.

With consumer sentiment improving and signs that the Chinese property crisis may be easing, additional factors may contribute to a boost in Chinese stocks in the months to come.

One Access Point: Individual Stocks

JD.com Backed by Bullish Analysts

The vagaries of the Trump administration's approach to tariffs may lead to significant opportunities for individual Chinese companies. E-commerce giant JD.com Inc. NASDAQ: JD has the potential to be one such breakout stock despite the fact that it has already experienced 56% 12-month returns as of March 10.

JD.com's future success may hinge on its exceptional logistics network. This component of its business has generated solid growth in both internal and external revenue in recent periods.

JD.com expects to double its warehouse capacity internationally this year, with key investments in AI and automation helping to achieve lofty efficiency goals. For example, international clients seeking non-U.S.-based alternatives to logistics services in the wake of new tariffs may find JD.com poised to step in.

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This is just one of the key factors prompting 12 out of 14 analysts to rate JD stock a Buy. The company has also moved into the massive Chinese food delivery market, for instance, a space in which its significant brand power may prove to be instrumental in driving customer growth.

GDS Holdings Rides China’s AI Boom

Another company worth considering is GDS Holdings Ltd. NASDAQ: GDS, a Chinese data center operator.

Chinese tech firms, particularly those focused on AI or related businesses, have heated up since DeepSeek's energy-efficient AI platform made international headlines in January. 

Additional government stimulus announced in the first days of March 2025 is likely to fuel the Chinese tech sector further.

GDS is far from the only company to benefit from surging demand for AI services. However, despite rising by 365% in the last 12 months, this firm still maintains a P/S ratio of 0.6, massively cheaper than most U.S.-based data center companies.

Alternative Approach: Broad Access Via iShares MSCI China ETF

If focusing on individual stocks seems too risky, investors may also benefit from wider exposure to a segment of the Chinese equities space via an exchange-traded fund (ETF). 

A broad-based China-focused fund like the iShares MSCI China Fund NASDAQ: MCHI is a strong play for those who are bullish on Chinese firms more broadly. MCHI has returned nearly 38% in the last year as of March 10, far outperforming the S&P 500.

With an influx of new specialized Chinese ETFs available, it is now also possible to balance the breadth of the portfolio with a targeted investment strategy such as Chinese tech firms, large-cap stocks, or even leveraged plays.

Each comes with its own set of benefits and disadvantages, and investors should always keep an eye on factors like expense ratio, liquidity, portfolio composition and weighting, and more. 

Still, those interested in exploring Chinese securities without committing themselves to the significant work of learning about a new market may find an ETF to be the most efficient way to capitalize on momentum while minimizing risk.