The U.S. trade deficit grew to a more-than-expected $36.5 billion in September, and 60.5% of the deficit was to China alone, writes Justin Fox for TIME. The U.S.-China economic relationship won’t be resolved anytime soon because of U.S.-based corporations selling products that were partly or entirely made in China. The more important fact, however, is that there is no way to ignore a rising political and military power like China. (Reasons to watch China).

The trade model between China and the United States remains unchanged, with China keeping the yuan artificially low and focusing on its export industries while the United States incurs a higher trade deficit and more debt, remarks Mark Trumbull for The Christian Science Monitor. (Is a strong Chinese yuan a good thing?)

Obama has not shown any pushback against China’s seemingly non-free market policies, despite promises on a tougher stance on China. However, economists are doubtful that any pushback would occur, citing several reasons:

• The tougher approach could result in higher-priced goods for U.S. consumers and the protectionism would rapidly spread to other nations, putting up trade barriers.
• China’s manufacturing power is not slowing one bit.
• An adjusted yuan won’t necessarily help U.S. manufacturers.
• The United States doesn’t have much leverage on China since China is the country’s main lender.

U.S. trade representative Ron Kirk stated that the United States wants trade and investment barriers removed to promote an open global trade system and Obama wants the United States to pursue “pragmatic cooperation” with Beijing, according to BBC News. Obama also urged Asian countries to break away from their dependence on exports and pursue “balanced,” sustainable growth.

For more information on China, visit our China category.

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 58.2% year-to-date

• SPDR S&P China (NYSEArca: GXC): up 66.8% year-to-date

• PowerShares Golden Dragon Halter USX China (NYSEArca: PGJ): up 65.9% year-to-date

• Claymore/AlphaShares China Small Cap (NYSEArca: HAO): up 96.5% year-to-date

• Claymore/AlphaShares China All-Cap ETF (NYSEArca: YAO): recently launched

Max Chen contributed to this article.

• With a surge in domestic consumption bolstered by optimistic Brazilians, low unemployment and increased wages, Brazil’s economy is projected to grow 9% for the fourth quarter, comments Martin Denholm for Investment U.

• For the full year, Brazil’s GDP is projected to fall between 1% and 1.5% after a major blow to its export market, but the market has shown signs of revival. (Brazil getting lift from China).

• Deputy Trade Minister Welbar Barral expects foreign direct investment to grow 33% in 2010. Moody’s already brought Brazil’s credit rating to investment grade back in September. (Is there an emerging market bubble?)

• Labor Minister Carlos Lupi stated that Brazil’s economy added 230,956 payroll jobs in October, bringing the number of jobs added to more than 1 million this year, reports Isabel Versiani for Reuters. He also expects the number of new jobs will rise to 2 million in 2010. (Brazil’s growing middle class)

• Lupi projects the economy will grow 2% in  2009 and 7% to 8% in 2010 while analysts estimate growth of 0.2% in 2009 and 5% in 2010.

For more information on Brazil, visit our Brazil category.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 121% year-to-date

• Market Vectors Brazil Small Cap (NYSEArca: BRF): up 35.1% in the last three months

Max Chen contributed to this article.

The broad market rally that began March was initially led by small-caps, but a shift has given  large-caps a place in the spotlight. What happened?

• Donna Kardos Yesalavich for The Wall Street Journal reports that small-caps were hit the hardest on the way down, because of the perception they are risky, given their lower liquidity, lack of international exposure and higher trading volatility. (Reasons why both large and small-cap ETFs can round out a portfolio). As a result, small-caps got so cheap that investors snapped them up in droves. The interest drove prices back up to their highest valuations since 1996, putting large-caps back in favor.

• Large-caps may also get a boost from their stability, something investors are still seeking as the markets recover. (Read about the small cap ETF rally here). As a result of the shift, John Spence for The Wall Street Journal notes that the iShares Russell 2000 Index Fund (NYSEArca: IWM) saw $1 billion in outflows in October. It brought in $2.2 billion in the previous three months.

• Profits for smaller companies are also expected to be slower in the fourth quarter, reports Lynn Thomasson and Sapna Maheshwari for Bloomberg. Earnings from small companies are projected to increase 38%, about half as fast as S&P 500 income. (Ways to play a large-cap rally.)

For more stories about asset class ETFs, visit our asset class category.

• SPDR S&P 500 (NYSEArca: SPY): up 23.6% year-to-date

• S&P 500 Growth (NYSEArca: IVW): up 28.3% year-to-date

• S&P Small Cap 600 (NYSEArca: IJR): up 17.7% year-to-date

• S&P Small Cap 600 Growth (NYSEArca: IJT): up 20.2% year-to-date

As the name might imply, revenue is the end-all, be-all in RevenueShares ETFs. Most ETFs weigh holdings by market capitalization, but RevenueShares weighs stocks based on sales, reports Alexandra Zendrian of Forbes.  Its funds are rebalanced once each year on Sept. 30, because quarterly rebalancing could lead to too many fluctuations.

Why revenues? Because it’s a number that’s difficult to fudge.

Dividends can be adjusted, earnings can be moved around by taking writeoffs and doing fancy accounting. The provider feels that revenues are simply a more consistent number to look at.

Another reason the provider has gone with revenues is because all companies have a revenue.

The provider says all of its funds are beating their underlying indexes year-to-date, RevenueShares Small Cap Fund (NYSEArca: RWJ) being the best performer. (More on revenue-weighted ETFs).

For more stories on asset class ETFs, visit our asset class ETF category.

Some of RevenueShares ETFs include:

• RevenueShares Large Cap Fund (NYSEArca: RWL): up 26.3% year-to-date

• RevenueShares Mid Cap Fund (NYSEArca: RWK): up 44% year-to-date

• RevenueShares Small Cap Fund (NYSEArca: RWJ): up 36.7% year-to-date

Kevin Grewal contributed to this article.

Chinese factory output growth surged to a 19-month high in October. China, the world’s third-largest economy and a voracious commodities consumer, is widely considered a driver in a global economic recovery, reports Luciana Lopez for Reuters. The numbers gave investors the confidence they were seeking to move toward greater emerging market risk.

President Luiz Inacio Lula da Silva is confident that Brazil’s economy will grow by 5% in 2010 and expects foreign reserves to reach $300 billion, further signaling a recovery for the Latin American country, reports Alex Lawler for Reuters .(Why Brazil is worth considering).

Brazil’s strong pace of recovery is another signal that the rapidly growing country has emerged from a recession; it posted 8%-10% growth in the third quarter, reports Industry Week. (Read about how Brazil’s middle class will help to benefit ETFs).

For more stories about Brazil, visit our Brazil category.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 120.8% year-to-date

• Market Vectors Brazil Small Cap (NYSEArca: BRF): up 29.5% since inception

Peter Crawford, senior vice president of IMS Client Solutions, says the lack of commission is neither a gimmick, nor a temporary promotion. “We think this is an offer that is yet another example of Schwab challenging the status quo in the industry.”

On top of that, Schwab is tacking on competitive fees for its funds. The fees for its first eight ETFs are mostly lower than those of competing funds. Crawford says that the low fees and commission-free trading should appeal to investors of all types. (Why Schwab’s launch could open doors).

“Whether you’re self-directed or buy-and-hold, trading is unlimited. There’s no cap on size, there’s no minimum,” Crawford says. Commission-free online trading is available to all individual investors at Schwab, the 6,000 independent investment advisor firms who use Schwab and in Schwab retirement accounts that permit trading of ETFs.

The first four of Schwab’s eight ETFs will begin trading tomorrow morning:

• Schwab U.S. Broad Stock Market (NYSEArca: SCHB), 0.08% expense ratio
• Schwab U.S. Large-Cap (NYSEArca: SCHX), 0.08% expense ratio
• Schwab U.S. Small-Cap (NYSEArca: SCHA), 0.15% expense ratio
• Schwab International Equity (NYSEArca: SCHF), 0.15% expense ratio

In December, Schwab will launch four more funds:

• Schwab U.S. Large-Cap Growth (NYSEArca: SCHG), 0.15% expense ratio
• Schwab U.S. Large-Cap Value (NYSEArca: SCHV), 0.15% expense ratio
• Schwab International Small-Cap Equity (NYSEArca: SCHC), 0.35% expense ratio
• Schwab Emerging Markets Equity (NYSEArca: SCHE), 0.35% expense ratio

Charles Schwab, whom Crawford knows personally, is very bullish on the ETF industry. “He’s fired up about ETFs. He’s an ETF investor himself.”

The firm anticipates that as more of the money currently sitting on the sidelines is redeployed back into the markets, a good portion of it will be allocated to ETFs. Studies have shown that advisors are also increasing their awareness of the funds and 38% of them plan to invest more in ETFs in the coming year.

For more stories about the latest ETF launches, visit our new ETF category.

Brazil is one step closer to joining the ranks of developed nations: its middle class is growing. For a country long divided between a small, wealthy elite and a vast army of have-nots, it’s a positive development that many believed was a long shot just a few years ago. (An investment upgrade by Moodys is also proof of the stable economy).

Alibaba reports that the true definition of a middle class is hard to define. Brazil uses a five-tier system to classify population by money. The middle tier, called Class C, comprises those with household income between 1,115 and 4,807 reals per month ($641 to $2,763). (What Brazil’s foreign investment tax means). This segment has ballooned to more than half the country’s total population.

The benefits of Brazil’s bigger middle class include:

• Programs have lifted 19 million people out of poverty and into this class
• They’re grabbing status symbols such as televisions and cars; new car sales jumped 20% in September
• The middle class can press for social change, improved schools and stronger political institutions
• They put a higher premium on citizens’ rights, such as multi-party elections and free speech

Mina Kimes for CNN Money reports that unemployment is down from its March peak, wages are up, and the Bovespa index, which tracks the country’s biggest stocks, has climbed 77% so far this year.  (Seven things to like about Brazil).

For more stories about Brazil, visit our Brazil category.

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 92.6% year-to-date

• Market Vectors Brazil Small Cap (NYSEArca: BRF): up 64.5% since May inception

Van Eck has registered with the Securities and Exchange Commission (SEC) for a new India small-cap ETF, reports Cinthia Murphy for IndexUniverse. The Market Vectors India Small-Cap ETF will seek to reflect the performance of the Market Vectors India Small-Cap Index. Potential investors should note that the fund will invest in the more volatile aspects of an already volatile equities market.

There are currently three ways to gain exposure to India’s economy: WisdomTree India Earnings Fund (NYSEArca: EPI), PowerShares India (NYSEArca: PIN) and iPath MSCI India Index (NYSEArca: INP). PIN and INP have exposure to large-caps; EPI has 20% weighted in mid-caps and the rest of its exposure is in large-caps.

India’s Finance Minister Pranab Mukherjee stated that the economy is recovery, albeit a slow one, according to RTTNews. The Prime Minister is for a rational interest rate policy moving along with fiscal measures to nurture the economy.

The Reserve Bank of India has adopted a soft monetary policy, issuing banking sector funds to aid the economy.

SBI Chairman O P Bhatt expects a 7% expansion in fiscal 2010, while RBI Professional forecasters revised their forecast downward to 6%, according to Outlook India. (Why India is moving up).

On the upside:

• Companies will likely ask banks for working capital loans as the IPO market picks up, which would help revive the economy
• The auto and infrastructure industries are seeing more demand
• Industrial production is up
• Business confidence is on the optimistic side
• Stock markets are strong

On the downside:

• Private consumption demand is slowing
• The first quarter showed a decline in corporate sales
• A weak monsoon season has hurt agricultural output
• Credit growth is low
• Exports have dipped

• PowerShares India (NYSEArca: PIN): up 64.2% year-to-date

• WisdomTree India Earnings (NYSEArca: EPI): up 78.7% year-to-date

Max Chen contributed to this article.

Assets: $289.9 million

Holdings: Small-cap companies domiciled  and primarily listed on an exchange in Brazil, or companies that generate at least 50% of their revenues in Brazil.

Objective: Tracks the Market Vectors Brazil Small-Cap Index.

What’s Good

• This fund gives exposure to the small-caps of Brazil; small-caps tend to outperform large-caps in periods of recovery, because their small size makes them more nimble.
• Weighted 30% in consumer discretionary, 17.3% in industrials, 16.7% in financials, 12.3% in materials.
• 56 securities make up the index.
• The expense ratio is 0.73%.

The Latest News

• Brazil recently instituted a 2% tax on foreign investment in equities and fixed income (What it could mean).

• With the right mix of policies, Brazil could sustain average annual economic growth of 5% over the next 10 years, according to Goldman Sachs.
• Brazil’s president is being credited with the country’s growth. He has built a foundation of low inflation and sound fiscal policy that has released a tide of investment in Brazil. (Our definitive guide to the BRICs).
• Around mid-2010, Jubak says, the carry trade could begin to unwind and lead investors to pull money out of assets that are currently in favor. But for now, Brazil’s small-caps are benefiting from the carry trade.
• Credit is back to normal levels and the economy is back on stable ground, reports Michael S. Derby for The Wall Street Journal. Brazil’s central bank claims the growth is sustainable, as well.
• The economy has added jobs to payroll and government data indicates companies are hiring workers to meet growing demand for manufactured goods and new homes, reports Isabel Versiani for Reuters.
• Retail sales are up for the fourth month in a row. Sales rose 4.7% in August from a year ago, report Joshua Goodman and Adriana Brasileiro for Bloomberg. Domestic demand indicates that continued economic support will continue.
• In 2010, Brazil’s economy is expected to grow 4.4%; this year, growth is expected to be around 0.12%. (How to play Rio’s Olympic win).

Fundamentals in favor of Brazil continue to improve while surprising and delighting investors. The future looks bright for the economy, especially if these numbers keep trending in the right direction. Jim Jubak for The Money Show lists some reasons why Brazil is a hot spot for investors, and we tossed in a few others, too:

• With the right mix of policies, Brazil could sustain average annual economic growth of 5% over the next 10 years, according to Goldman Sachs.
• Brazil’s president is being credited with the country’s growth. He has built a foundation of low inflation and sound fiscal policy that has released a tide of investment in Brazil. (Our definitive guide to the BRICs).
• Around mid-2010, Jubak says, the carry trade could begin to unwind and lead investors to pull money out of assets that are currently in favor. But for now, Brazil’s small-caps are benefiting from the carry trade.
• Credit is back to normal levels and the economy is back on stable ground, reports Michael S. Derby for The Wall Street Journal. Brazil’s central bank claims the growth is sustainable, as well.
• The economy has added jobs to payroll and government data indicates companies are hiring workers to meet growing demand for manufactured goods and new homes, reports Isabel Versiani for Reuters.
• Retail sales are up for the fourth month in a row. Sales rose 4.7% in August from a year ago, report Joshua Goodman and Adriana Brasileiro for Bloomberg. Domestic demand indicates that continued economic support will continue.
• In 2010, Brazil’s economy is expected to grow 4.4%; this year, growth is expected to be around 0.12%. (How to play Rio’s Olympic win).

For more stories about Brazil, visit our Brazil category.

• iShares MSCI Brazil (NYSEArca: EWZ): up 117% year-to-date

• Market Vectors Brazil Small Cap (BRF): up 86.7% since inception