China ETFs to Consider as the Country Looks Forward to Self-Reliance

After being the epicenter of the Covid-19 pandemic, China is continuing its path to normalcy without outside assistance—this path towards more self-reliance could give China exchange-traded funds (ETFs) a boost.

“China is looking to reduce its reliance on overseas markets and technology for its economic development, government advisers say, as U.S. hostility and a global pandemic increase external risks that could hamper longer-term progress,” a Reuters report noted. “The country’s leaders have proposed a so-called ‘dual circulation’ model of growth to steer the economy, the sources said, which would prioritize ‘internal circulation’ to boost domestic demand and be supplemented by “external circulation”. No details have been given on the strategy.”

“Policy insiders and government advisers said the emphasis signals a strategic shift to local demand and technological development although domestic supply chains would be built partly with the help of foreign investment,” the report added.

“The Chinese leadership raised the ‘internal circulation’ concept as the situation has become grim, although complete (reliance on) ‘internal circulation’ is unlikely,” said a policy insider, per the Reuters report.

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Trading Leveraged China ETFs

If China can continue to improve economically without the help of other countries, some leveraged ETFs to watch going forward include the Direxion Daily FTSE China Bull 3X ETF (YINN)Direxion Daily FTSE China Bear 3X ETF (YANG), Direxion Dly CSI 300 China A Share Br 1X ETF (CHAD), Direxion Daily CSI 300 CHN A Share Bl 2X ETF (CHAU), and Direxion Daily CSI CHN Internet Bull 2X Shares (CWEB).

With regard to CWEB, the fund tracks the CSI Overseas China Internet Index, which is provided by China Securities Index Co., LTD. The Index is designed to measure the performance of the investable universe of publicly traded China-based companies whose primary business or businesses are in the Internet and Internet-related sectors, as defined by the index sponsor, China Securities Index Co., Ltd.

A China-based company is a company that meets at least one of the following criteria: 1) the company is incorporated in mainland China; 2) its headquarters are in mainland China, or 3) at least 50% of the revenue from goods produced or sold, or services performed in mainland China. The Index Provider then removes securities that during the past year had a daily average trading value of less than $500,000 or a daily average market capitalization of less than $500 million.

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