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What is a 'China ETF'

The China ETF is an exchange-traded fund that deals with investments in corporations based in China.

BREAKING DOWN 'China ETF'

The China ETF invests in and tracks the profitability of China-based companies. Investors can invest through the Chinese exchange or by purchasing foreign-based shares. Due to strict regulations against certain international investments and the proliferation of state-run companies in China, ETFs that represent the country are limited those that offer public shares.

Through investing in a China ETF, investors can gain exposure to China and still achieve index diversification. Investors are frequently interested in China thanks to its abundant population and steady economic development. However, since so many of the companies are still state run or do not have public shares offered, China ETF's are more limited towards companies in the fields of telecommunications, finance and energy. As the Chinese markets continue to step away from state-run and privately held companies, the ETF’s for the region will continue to grow and diversify in that sector. There are currently two main stock exchanges operating in China, the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

China in the News

Although China has long been considered a U.S. ally, recent tensions over tariffs have created a contentious relationship between the two nations. Recently threats of increased tariffs between the U.S. and China have caused many experts to warn of an impending trade war. In early 2018, President Trump imposed tariffs on solar panels and washing machines. Reportedly, most of the world’s solar panels come from China and the country took this as a direct attack on their economy. Next the U.S. imposed increased tariffs on steel imports; China is the world’s largest manufacturer of steel. By the middle of 2018, Donald Trump announced a proposed $50 billion in annual tariffs on Chinese imports. China responded by promising $3 billion worth of tariffs on U.S. imports. The two countries went back and forth, adding products to the lists that would receive additional tariffs, and increasing the dollar amounts to almost double the original threat.

At one point, it appeared that the two nations would reach an agreement as they began to negotiate and soften on some of their demands. Then, a renewed threat came from the U.S. bringing an increased price tag and the vow to hold public hearings on the matter. China responded by stating that the country intends to levy more tariffs to keep up with the threats from the Trump administration.

Only time will tell how the relationship with China will proceed, and where the final tariff figures will fall.

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