Why China is 2025’s Hottest Investment Bet

New Delhi [India], May 19: Until 2024, Chinese stock markets had been struggling. The CSI 300 stayed flat, and the Hang Seng Index dropped around 30% between 2018 and 2023.

But something changed in 2024: A sudden turn in direction. Some indices like the CSI 300 gained 25% in just one week, renewing investor interest around the world. The best part? The same soaring markets are now readily available to Indian investors. Trading platforms like Appreciate are offering an easy way to tap into this rally through China-focused ETFs.

Let’s explore why this rebound happened, what changed in 2024, which ETFs are worth watching, and what risks investors should understand before diving in.

What Are China-Focused ETFs?

China-focused ETFs are exchange-traded funds that invest in a basket of Chinese stocks. These stocks can be:

A-shares: Mainland China stocks listed in Shanghai or Shenzhen.

H-shares: These are the shares of Chinese companies listed in Hong Kong.

ADRs (American Depositary Receipts): These are Chinese firms that are listed on US exchanges.

These ETFs give investors a simple, diversified way to invest in China’s economy. Previously, this kind of access was only available to high-net-worth individuals or institutions. But trading apps like Appreciate have made it possible for Indian retail investors to buy these ETFs with just a few taps on their phones.

Why are Chinese Markets in the News?

After a decade of disappointing returns, 2024 saw Chinese equities mount a dramatic comeback. The MSCI China Index, which had posted a compound annual growth rate (CAGR) of just 1.4% from 2014 to 2023, surged by 19.4% in 2024 alone.

By May 2025, the momentum only accelerated. The MSCI China Index had delivered a one-year return of over 26%, making it one of the best-performing major indices globally during that period. In comparison, the MSCI India Index posted a year-to-date (YTD) return of around 7% in 2025, while the MSCI US Index gained approximately 20% for the full year. This turnaround marked a rare instance of Chinese equities decisively outperforming both Indian and US markets.

The Shanghai Composite Index, which ended 2023 below the psychological threshold of 3,000, also rallied. By early May 2025, it had climbed to over 3,350, representing a gain of more than 12% in just over a year.

This market rally was significant and involved major sectors such as technology, consumer discretionary, and telecommunications. However, the breadth of the rally was somewhat concentrated, and the market remained sensitive to policy developments. For long-time investors who had endured years of volatility and stagnation, 2024 represented a long-awaited shift toward meaningful capital appreciation.

What Caused the Sudden Surge in 2024?

1. Market Support from the Government

In 2024, the Chinese government took bold steps to boost confidence. State-owned firms like Central Huijin and China Reform Holdings started buying shares and launched major share buybacks. This injected liquidity and lifted stock prices.

2. Reforms in the A-Share Market

China made it easier for foreign investors to access A-shares or Stocks listed on mainland Chinese exchanges:

The lock-up period for foreign strategic investors was reduced from 3 years to just 1 year

Minimum asset and ownership requirements were lowered

Investors could now use shares of non-listed overseas companies as payment

These changes brought in more foreign investment and gave global investors new ways to access Chinese stocks.

3. State Council’s 9-Point Plan

The State Council released a 9-point roadmap to modernize China’s capital markets. Key changes included:

Linking State-Owned Enterprises’ (SOE) executive performance to shareholder returns

Promoting share buybacks and dividends

Improving market liquidity and investor protections

Simplifying IPO and delisting rules

These policies helped rebuild investor trust, especially after years of market interventions and regulatory uncertainty.

4. Economic Recovery

China’s GDP grew 5.3% in Q1 2024. Household consumption started to rise again. Though still only 39% of GDP, consumer spending improved thanks to supportive policies and rising wages.

5. The 2024 Stimulus Package

In late 2024, China launched a stimulus package:

A 0.5% cut in the reserve requirement ratio added 1 trillion yuan in liquidity

Mortgage rates were reduced, saving homeowners over 150 billion yuan

300 billion yuan was allocated for SOEs to buy unsold homes

Down payment rules were eased, especially for second-home buyers

These moves boosted consumer confidence and stabilized real estate.

4 China-Focused ETFs to Watch

1. iShares MSCI China ETF (MCHI)

Exposure: H-shares and US-listed Chinese firms

YTD Return (May 2025): 14.49%

Expense Ratio: 0.59%

2. KraneShares CSI China Internet ETF (KWEB)

Exposure: H-shares and ADRs in the tech sector

YTD Return (May 2025): 14.97%

Expense Ratio: 0.70%

3. SPDR S&P China ETF (GXC)

Exposure: Mixed (A, H, and ADRs)

YTD Return (May 2025): 11.71%

Expense Ratio: 0.59%

4. iShares China Large-Cap ETF (FXI)

Exposure: Mostly H-shares

YTD Return (May 2025): 15.32%

Expense Ratio: 0.65%

Risks to Consider Before Investing in China

Geopolitical Tensions

Tensions between China and the U.S. escalated in early 2025, sparking a new tariff war. By April, U.S. tariffs on Chinese goods rose to 124–145%, while China imposed retaliatory tariffs up to 125% on U.S. goods. These measures affected about 2.2% of China’s GDP, with potential near-term losses of 1.1% if exports halved.

Government Interventions

China’s government often intervenes in the economy. While this can provide short-term support, it also adds uncertainty. Crackdowns on tech companies in recent years-such as the suspension of Ant Group’s IPO (Alibaba), antitrust fines on Tencent, and restrictions on Didi Chuxing-show how unpredictable policy changes can affect entire sectors overnight

Real Estate Troubles

China’s property sector has long been a key growth driver. But high debt levels and overbuilding led to a crisis. Even though stimulus efforts are helping, many developers are still struggling to sell homes or refinance loans. A slow recovery here could drag on growth.

Currency Fluctuations

The Chinese yuan has seen volatility, especially amid global rate changes. For Indian investors, any yuan depreciation can eat into returns when converting profits back to rupees.

Grab Your Share of $15Tn Chinese Market

China’s equity market rebound in 2024 was no coincidence—it was driven by targeted policy measures, structural reforms, and significant stimulus efforts. However, risks such as geopolitical tensions, currency fluctuations, and property sector concerns still warrant attention.

For Indian investors, direct access to Chinese equities is often complicated by foreign ownership limits and regulatory challenges. China-focused ETFs provide a practical alternative—offering diversified, cost-effective exposure without the complexities of international investing.

This is where Appreciate adds value. The platform enables seamless investment in top China-focused ETFs—without the need for foreign brokerage accounts, remittance fees, or extensive paperwork. With fractional investing, one can start with as little as ₹1.

Download the Appreciate app from Google Play and join over 5 lakh Indian investors today.

Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory.

 

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