Playing the Semiconductor and Cleantech Growth Potential in China | ETF Trends

The global economy is still recovering from and dealing with supply chain disruptions, something that has driven China to redouble its efforts towards self-reliance when it comes to energy and semiconductor chips, the powerhouses behind much of today’s innovations.

Cleantech has been on the rise in China and given the regulatory support and environmental goals that the Chinese government has set for the country, it has much further room to grow in the coming decade. Clean energy companies such as Longi Green Energy, solar company Tongwei, and Sungrow Power were all up strongly in trading in Mainland China markets, reported Brendan Ahern, CIO at KraneShares, in the China Last Night blog.

Semiconductor-related companies also experienced a strong day of trading on the Mainland, with global battery giant CATL up 2.01% in trading volume, and TongFu Electrics, a company that specializes in integrated chips and offers testing and assembling for a wide range of chips, was up 9.98% in trading volume overnight.

They’re both arenas that have underlying support from China’s regulators as the country works to build out its semiconductor industry, trying to catch up to the rest of the world and expanding aggressively, while the focus on renewables and clean energy transition has China moving at a rapid pace in increasing solar, wind, and other renewable options.

“Two key themes for the US and China will be semiconductors and energy independence, with clean technologies playing a big part,” wrote Ahern.

Investing in Expansion

China is one of the world leaders in 5G technology adoption as well as spending, and it is working rapidly to become self-sufficient with semiconductor production, with goals of 70% domestic use by 2025. The KraneShares CICC China 5G and Semiconductor ETF (KFVG) offers exposure to these rapidly expanding industries within China.

KFVG tracks the performance of the CICC China 5G and Semiconductor Leaders Index, an index that contains the top 30 Chinese companies by free-float market cap that are within the following industries: semiconductor manufacturing, manufacturing equipment & services, internet & data services, electronic equipment manufacturing, electronic components, consumer electronics, computer hardware & storage, communications equipment, and commercial electronics.

KFVG has an expense ratio of 0.65% with fee waivers that end on August 1, 2023.

China is currently the world leader in total renewable energy capacity, holding 43% of global capacity, and the KraneShares MSCI China Clean Technology Index ETF (KGRN) capitalizes on investing in clean technology in China’s growing economy. China plans to have renewable energy make up 35% of its electricity needs by 2030 and is well on the way to that goal.

KGRN tracks the MSCI China IMI Environment 10/40 Index and is based on five clean technology themes: alternative energy, energy efficiency, green building, sustainable water, and pollution prevention.

It allows investors direct exposure to ESG market movers in China such as Li Auto Inc. at 11.77%, Nio Inc. at 10.09%, and BYD Co. at 8.19%.

The ETF has an expense ratio of 0.78%.

For more news, information, and strategy, visit the China Insights Channel.