Regardless of who ends up as president at the start of 2021, China will move forward with its ambitious plan of self-reliance. Within a five-year timeframe, China looks to become self-reliant, particularly in the area of technology, which should benefit ETFs like the Invesco China Technology ETF (CQQQ).
Think of CQQQ as the Chinese equivalent of the ever popular, go-to large cap tech-focused Invesco QQQ Trust (QQQ). At a 0.70% expense ratio, CQQQ may not be as cost-efficient as QQQ at 0.20%, but with a 52% gain year-to-date, it’s hard to argue with results (compared to 39% for QQQ).
That said, you’ll sacrifice cost, but you’ll get more gains if China can deliver on it’s five-year plan. As for CQQQ, the fund is based on the FTSE China Incl A 25% Technology Capped Index (Index).
CQQQ will invest at least 80% of its total assets in securities that comprise the Index as well as American depositary receipts and global depositary receipts based on the securities in the Index. The Index includes constituents of the FTSE China Index and FTSE China A Stock Connect Index that are classified as information technology securities, including China A-shares and China B-shares.
Instead of names like Apple or Amazon in QQQ, you’ll get exposure to China tech giants like Tencent Holdings and Baidu. Additionally, as the fund’s description states, you’ll get diversification by exposure to China’s A-share and B-share equities.
The Tech War Focuses on Self-Reliance
Regardless of a Trump or Biden administration, China will forge on with its aggressive plans to harness its own technological advances. Per a US-China relations article, the second largest economy’s tech sector “is expected to double down on research and development over the next five years, as the country’s new economic road map pushes for increased self-reliance and innovation amid trade disputes with the United States, according to analysts.”
“China still stands at the middle and lower-end of global supply chains, and relies heavily on others for core technology and parts such as aircraft engines and chips,” said Liu Qiao, Dean of the Guanghua School of Management at Peking University. “US-China trade tensions make [supply chains]more complicated … Increased investment in research and development is an important step [for the tech sector to achieve the plan’s goal].”
Furthermore, China continues to rebound from the COVID-19 pandemic so CQQQ could also be used as a short-term play for a 2021 rebound for traders.
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