5 Best China ETFs in Canada (Oct 2022): Invest in a Global Powerhouse

Are you interested in the market movements of China but don’t know which securities you should add to your portfolio?

It’s no secret that China has become one of the fastest-growing global economies.

The best China ETFs in Canada can help you invest in a basket of Chinese securities without purchasing individual stocks.

By the time you are done reading the list below, I am confident you can make a decision about whether or not China ETFs aligns with your investment goals.

What is the Best China ETF in Canada?

Best China ETFs In Canada Infographics

The best China ETFs in Canada are ETFs tracking publicly listed Chinese companies and gives investors access to Chinese markets without the need to directly purchase those stocks. 

They allow Canadian investors a way to geographically diversify their portfolios by owning companies in the world’s second-largest economy.

China has a significant number of state-owned Chinese enterprises. However, there still are Chinese companies whose shares are publicly traded and provide investors with opportunities.

China ETFs trading in Canada own shares of some of the top Chinese companies, including the Alibaba Group Holding Ltd., Ping An Insurance Group Co. of China Ltd., and several others.

Investing in China ETFs carries its fair share of risks, such as trade tensions with the world’s biggest economy and our neighbours, the US. Still, many investors are placing long-term bets on China, and the list of the best China ETFs in Canada can help you get the start you need.

1. BlackRock iShares China Index ETF

blackrock
  • Ticker: XCH.TO
  • Dividend Yield: 1.70%
  • Assets Under Management: $99.55 million
  • MER: 0.86%
  • Stock Price: $17.71
  • YTD Return: -20.26%

BlackRock iShares China Index ETF is one of the best China ETFs in Canada. The ETF seeks to replicate the performance of the FTSE China 50 Index.

This BlackRock iShares ETF effectively provides investors with exposure to 50 of the largest publicly-traded Chinese companies in terms of market cap.

The fund doesn’t directly invest in stocks, but rather in other ETFs. Its biggest holding is the iShares China Large-Cap ETF trading on the NYSE. The medium- to high-risk fund is mostly focused on China’s finance sector with a 35.98% weighting on financials.

2. BMO MSCI China ESG Leaders Index ETF

BMO
  • Ticker: ZCH.TO
  • Dividend Yield: 0.57%
  • Assets Under Management: $93.01 million
  • MER: 0.72%
  • Stock Price: $14.03
  • YTD Return: -29.46%

ZCH seeks to replicate the performance, to the extent possible, of the MSCI China ESG Leaders Index.

The index is focused on high ESG rating companies, which means it won’t invest in companies that have significant revenues from more controversial sources such as tobacco, gambling, and alcohol.

The ETF is a medium to high-risk rating, and invests mainly in consumer discretionaries (52.2%) and communication services (19.6%)

ESG has been a focal point for many Canadians recently, with many ESG ETFs being started in the last decade.

3. Vanguard FTSE Emerging Markets All Cap Index ETF

Vanguard Logo Transparent
  • Ticker: VEE.TO
  • Dividend Yield: 2.70%
  • Assets Under Management: $1.5 billion
  • MER: 0.24%
  • Stock Price: $31.24
  • YTD Return: -16.13%

The Vanguard FTSE Emerging Markets All Cap Index ETF does not only track the Chinese stock market. 

The objective of the VEE is to track, to the extent possible, the performance of a broad emerging markets index. Currently, the ETF is tracking the FTSE Emerging Markets All Cap China A Inclusion Index.

The fund invests directly or indirectly in large, mid, and small-cap stocks of companies located in emerging markets. It invests primarily in the US-domiciled Vanguard FTSE Emerging Markets ETF.

The ETF has a lower MER compared to most of the other ETFs listed in the guide, making it an attractive option to consider. 

4. First Asset CI ICBCCS S&P China 500 Index ETF (Unhedged)

ci first asset logo
  • Ticker: CHNA-B.TO
  • Dividend Yield: 1.41%
  • Assets Under Management: $9.69 million
  • MER: 0.59%
  • Stock Price: $22.5
  • YTD Return: -24.99%

CHNA.B seeks to track, to the extent possible, the price and yield performance of the S&P China 500 Index. The underlying ETF selects the largest 500 companies from the S&P broader S&P Total China BMI Index.

The Index represents the entire investment universe of Chinese companies that qualify for the minimum market cap and trading volume thresholds.

Most other ETFs in the list of the best China ETFs in Canada have a more focused approach toward investing in Chinese companies. However, CHNA.B provides investors with exposure to a broad range of equity securities in Chinese companies.

5. Horizons China High Dividend Yield Index ETF

horizons logo
  • Ticker: HCN.TO (Delisted and discontinued)
  • Dividend Yield: 5.98%
  • Assets Under Management: $6.35 million
  • MER: 0.70%
  • Stock Price: $22
  • YTD Return: 9.39%

Note that this ETF has been discontinued by Horizons, most likely due to very low assets under management. I left this in the list though, because I wanted to highlight an important risk to take into account. The less popular an ETF is, the more likely the fund could potentially be closed. This could have some bad tax consequences in non-registered accounts because if you are forced to sell at a gain, you will have to pay taxes.

Horizons China High Dividend Yield Index ETF fundamentally focuses on replicating, to the extent possible, the performance of the Hang Seng High Dividend Yield Index (the “Underlying Index”), net of expenses. The ETF invests primarily in the Underlying ETF.

The underlying index is designed to measure the performance of Hong Kong-listed equity securities that are primarily characterized by their high yields. 

Some of the ETF’s top holdings include Agile Group at 4.12%, Vtech Holdings at 3.41%, and Xinyi Glass at 3.34%. The ETF might be more suitable for investors chasing a higher yield for returns instead of focusing solely on capital gains.

How to Buy China ETFs in Canada

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

Readers Choice
Qtrade
Qtrade
  • 105 commission-free ETFs to buy and sell
  • Excellent customer service
  • Top-notch market research tools
  • Easy-to-use and stable platform 
Low Fees
Wealthsimple Trade
Wealthsimple Trade
  • Stock and ETF buys and sells have $0 trading fees
  • Desktop and mobile trading
  • Reputable fintech company
  • Fractional shares available
Well-Rounded
Questrade
Questrade
  • ETF buys have $0 trading fees
  • Excellent market research tools
  • Most types of registered accounts available

To learn more, check out my full breakdown of the best trading platforms in Canada.

Conclusion

The best China ETFs in Canada can get you more convenient exposure to Chinese markets without letting you make the effort of researching and choosing individual stocks.

Additionally, not all China ETFs in Canada are made the same. Each ETF offers a basket of companies that you can invest in based on your investment goals.

You can consider investing in these China ETFs depending on what your investment goals are. If you want a simple solution, consider investing in an all-in-one ETF.

Photo of author
Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

Check Out These Posts:

3 thoughts on “5 Best China ETFs in Canada (Oct 2022): Invest in a Global Powerhouse”

  1. Hi Christopher
    I found your 2022 January 17
    5 Best China ETF in Canada, relevant and useful.

    Unfortunately nothing was mentioned about Chinese ADRs delisting threats by the US government… this threat is significant and should be fully disclosed and assessed as much as facts are available.

    It would be much more relevant and useful to readers who are actively seeking opportunities to China ETFs for long long long term capital growth.

    Thank you so much for your brief insights
    I look forward to updated facts and impacts of Chinese ADRs being delisted in US

    Reply
  2. HCN got de-listed yesterday. Horizons pulled it out, I imagine because it wasn’t popular enough. I thought about this “fringe risk” earlier, ETF de-listing. It’s not a big risk really, but something to be aware of. As it may have serious tax consequences, since you’re essentially forced to liquidate (i.e. sell for cash then find an alternative). So, you may face tax consequences (capital gains) or sell at a loss without the chance to recoup your gains on a longer term.

    It doesn’t matter if held in a registered account (RRSP / TSFA), but it does if not (my case). Also, you face the hassle and surprise to find an alternative (at a potentially bad timing). For example, Mar 10 is pretty much the start of a strong bounce back from the correction in stocks since late February.

    Lesson is this I think: make sure you pick ETFs which have a decent average daily volume or AUM (assets under management). My thinking is, if it’s popular enough the fund issuer won’t close it, but if it’s no popular it probably means it’s not that profitable for the fund company to maintain it, hence they might close it (as Horizons did in HCN’s case).

    Reply

Leave a Comment