Aside from more tariffs, the US-China trade war is also producing one byproduct it didn’t intend from the outset–growing Chinese nationalism. This could put China-focused ETFs on watch as the second-largest economy looks to become less reliant on the U.S. to shore up its economy.
In addition, China is willing to exercise patience as opposed to rushing into a trade deal with the U.S.
“Don’t forget … Chinese (are) very patient historically, they’ll wait it out, they’ll play lots of different angles. They’re going to try to hang in there, waiting for President (Donald) Trump to come to them,” said Max Baucus, a former American ambassador to China.
Imposing Duties
China announced plans to impose additional duties on $75 billion worth of American goods on Sept. 1 and Dec. 15. In response to these latest measures, President Donald Trump tweeted that his administration would also raise tariffs on $550 billion of Chinese imports.
“From China’s perspective, China … has a hard time trusting President Trump, who keeps changing his mind. He pulls out the rug from under his negotiators … The Chinese are afraid to reach a deal with this president — it may not last, they can’t count on it, he might change his mind again,” Baucus said.
“If there’s another administration, they think it might be better in the sense that it’d be more predictable, there’d be less uncertainty. It’d be more standard negotiations,” he continued.
With all the trade talk news inundating the media, it’s easy for investors to get caught up in the hype of investing in China as a value play. The last thing an investor should do is dive deep into China blindly even if China is becoming less resistant to safeguarding its businesses, which will open the pathways to more foreign investment even as trade wars continue.
ETF investors can look to the VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: PEK) and VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: CNXT) to gain direct access to Chinese mainland markets.
While PEK provides investors with large-cap exposure to Chinese markets, investors can opt for CNXT to gain small-cap exposure. CNXT seeks to mimic the performance of the SME-ChiNext 100 Index (CNI6109), which tracks the performance of the 100 largest and most liquid China A-share stocks listed and traded on the Small and Medium Enterprise Board and the ChiNext Board of the Shenzhen Stock Exchange.
Additionally, investors should give the VanEck Vectors China AMC China Bond ETF (NYSEArca: CBON) a look. CBON seeks to replicate the price and yield performance of the ChinaBond China High-Quality Bond Index, which is comprised of fixed-rate, Renminbi-denominated bonds issued in China by Chinese credit, governmental and quasi-governmental issuers.
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