A Brookings Institute article recently highlighted how the U.S. can take cues from China in order to advance their technological competitiveness. In the meantime, a pair of powerful China ETFs to consider are the VanEck Vectors China Growth Leaders ETF (GLCN) and the VanEck Vectors ChinaAMC SME-ChiNext ETF (CNXT).

The article explained how China’s success can be attributed to a shift away from a planned economy. Additionally, creating cheaper versions of existing products gave the Chinese population more access to technology like smartphones, which gave rise to tech giants like WeChat, Xiaomi, and Tinno.

“Connecting the population digitally paved the way for apps like WeChat, which allow users to do everything from messaging to mobile banking,” the article noted. “These advances have become so widespread that companies like Xiaomi and Tinno have spawned from the shanzhai ecosystem to become authentic technology competitors on the world stage.”

VanEck’s ETFs

GLCN seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MarketGrader China All-Cap Growth Leaders Index. The index is comprised of Chinese equity securities that are generally considered by the index provider to exhibit favorable fundamental characteristics, according to its proprietary scoring methodology. The fund offers:

  • Access fundamentally sound Chinese companies with attractive growth potential at a reasonable price (‘GARP’)
  • The entire Chinese opportunity set, regardless of size or listing location
  • The potential to outperform traditional capitalization-weighted benchmarks by selecting top-ranked companies

 

GLCN Chart

CNXT seeks to replicate as closely as possible the price and yield performance of the SME-ChiNext 100 Index. The index is a modified, free-float adjusted index intended to track the performance of the 100 largest and most liquid stocks listed and trading on the Small and Medium Enterprise Board and the ChiNext Board of the Shenzhen Stock Exchange. The SME-ChiNext Index is comprised of China A-shares.

CNXT gives investors:

  • A Consumer-Driven, ‘New Economy’ Sector Focus: New Economy sectors such as information technology, consumer discretionary, consumer staples, and health care are well-represented in the Fund’s underlying index.
  • Exposure to Privately Owned Small- and Medium-Sized Enterprises (SMEs): Non-government owned small- and medium-sized enterprises have driven the majority of recent technological innovation and economic growth in China.
  • A Historically High ROE: The underlying index has historically had a higher average Return on Equity (ROE) compared to China A-share small-cap benchmarks.

 

CNXT Chart

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