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Hey fellow investors! I know many of us have been watching the headlines lately — and a big trend I’ve noticed is this: more investors are pivoting away from the US, and shifting attention toward China and Europe.

Now, I know China isn’t the easiest market to invest in — there’s been volatility, headlines, and a lot of emotion. In fact, I’ve been burnt by China before myself, having invested heavily during the pandemic, looking for the recovery that never came. 

If you’re looking to diversify beyond the US – or feel like now might be the right time to start investing – or re-investing, in China – I’d like to share how I’m doing it, I’ve been building a strategy around three ETFs that offer a blend of growth potential, defensive stability, and yes — even a 6% dividend yield from one of them.

If you’re someone who prefers a simple, diversified approach over picking individual China stocks, this post will be especially relevant. And I’ll explain why I chose each ETF over the popular alternatives, and how they work together as a balanced portfolio slice.

Just to be clear upfront — I’m not saying this is the time to invest in China. The risks are still very real, from policy uncertainty to trade tensions. This isn’t a buy call. I’m simply sharing how I’ve chosen to structure my China exposure for the long term, in case the recovery story continues to unfold.

Before we dive in, let me remind you that this post is for informational purposes only and not financial advice. Always do your own research and consult a licensed financial adviser before making any investment decisions. I own some of the ETFs discussed, but what works for me might not work for you.

Alright, let’s start with addressing the elephant in the room.

Why Is China Investing So Divisive?

Let’s be honest — investing in China is a polarising topic.

There are investors who swear they’ll never touch Chinese stocks again, after being burnt in 2021 and 2022. Regulatory crackdowns, tech restrictions, the Evergrande property crisis, and US-China tensions — all these issues led to a massive sell-off across the board. The CSI 300 Index, which tracks top onshore companies, fell more than 40% from its 2021 peak through to late 2023.

But on the other side, there are those who held on — or even kept adding. And in 2024, that faith started to pay off. Since January, Chinese equities have staged a recovery. Year-to-date, the CSI 300 is slightly positive, while the Hang Seng Tech Index surged close to 20% – one of its strongest rallies in years. What’s driving this? A mix of bargain hunting, rumours of more stimulus, and direct support from state-owned enterprises or SOEs and even patriotic retail investors.

Yes, you heard right — SOEs have reportedly been buying ETFs and stock index futures to stabilise markets. News agencies have shown clips of empty warehouses in some industrial zones, highlighting the slowdown — this is clearly extremely unsettling. But Beijing is clearly aware, and has pledged to step in. From liquidity injections to easing rules on overseas listings, they’re trying to boost sentiment.

And let’s not forget the retail wave. In the early months of 2024, there were viral videos of young Chinese investors shouting “support the nation, buy stocks”, as they opened new brokerage accounts. Whether coordinated or spontaneous, it does reflect a sentiment shift on the ground.

And what about the tariff fears? The US and China just concluded a round of talks and announced on 12 May 2025, to lower the tariffs on Chinese goods to 30% from 145%, and China will reduce its tariffs to 10% from 125%, for 90 days. This is indeed a promising development. 

Still, there are risks. Tariff talks between the US and China could flare up again. Demand remains weak in certain sectors. And foreign investors remain cautious. But in this mixed environment — with both risk and recovery signals — I’ve decided that a balanced, ETF-based approach is the best way for me to participate without overexposing myself to any single theme.

Alright, let’s move on — and I’ll walk you through the first ETF I’m using to build my China exposure.

Tapping into China’s Domestic Consumption Potential

When thinking about how to gain from a potential China recovery — especially if the government rolls out further stimulus to boost its economy — one ETF that stood out to me is the iShares MSCI China A ETF, listed on the London Stock Exchange under the ticker CNYA

What makes CNYA special is that it focuses entirely on A-shares — these are stocks of mainland Chinese companies listed in Shanghai and Shenzhen, denominated in renminbi, and mostly held by domestic investors. These are not the flashy internet giants listed in the US or Hong Kong. Instead, CNYA gives you exposure to the companies most likely to benefit from domestic stimulus. 

The fund is managed by BlackRock through its iShares platform, and the ETF tracks the MSCI China A Inclusion Index, which includes over 400 of the largest and most liquid A-shares. The biggest sector weight is in financials at about 20%, followed by technology and industrials. Its top holdings include well-known mainland giants like Kwei chow Moutai, the liquor maker often seen as a barometer of domestic sentiment, CATL, a key player in China’s electric vehicle battery supply chain, and Ping An Insurance. These are all companies that serve the domestic Chinese market, not just global exports — which fits into my objective of positioning for internal consumption recovery.

Now, a common alternative that many investors might consider is the iShares MSCI China ETF, or MCHI, listed in the US. MCHI invests in Chinese stocks, including those listed in Hong Kong and the US like Alibaba and JD.com. But here’s the issue — MCHI comes with US regulatory risk. Over the past few years, the US government has repeatedly threatened to delist Chinese companies from American exchanges, citing national security and audit transparency concerns. In fact, just recently, US lawmakers again called for the SEC to consider delisting Alibaba. For me, that’s a risk I’d rather avoid — especially since it creates headline risk and potential liquidity concerns. And just a heads-up — the next ETF I’ll be covering in a moment includes some of MCHI’s biggest names. So if you’re a fan of Alibaba or other tech giants, hang tight!  

CNYA, being listed in London and tracking domestically listed companies, avoids that overhang. And so far, performance has been encouraging — it’s up over the past year as sentiment towards China has slowly improved. The management fee of 0.60% is on the higher end for ETFs, but I think it’s fair given the niche exposure and the operational costs of accessing the onshore Chinese market.

So if you’re thinking of a way to play a potential China rebound from the inside, avoiding exports, CNYA is a pretty solid candidate. It’s not flashy, but it gives you a foothold in the part of China that Beijing is most focused on stimulating.

Riding the Wave of China’s Tech Giants

When considering exposure to China’s recovering technology sector, I’ve chosen the Lion-OCBC Securities Hang Seng Tech ETF, traded on the Singapore Exchange under the ticker HST This ETF tracks the Hang Seng Tech Index, which comprises 30 of the largest tech-themed companies listed in Hong Kong. These firms are involved in areas like cloud computing, e-commerce, fintech, and the internet of things.

Launched in December 2020, HST is managed by Lion Global Investors in collaboration with OCBC Securities. The ETF has an annual management fee of 0.45%.

The fund’s top holdings include prominent names such as Xiaomi Corporation, Tencent Holdings, Alibaba Group, JD.com, and Meituan. These companies are at the forefront of China’s tech innovation and are well-positioned to benefit from the country’s focus on digital transformation and AI initiatives.

I know many of you invest directly into some of these shares, since they are listed in Hong Kong. This Uncle also has some individual holdings as well. But I found it simplifying to get exposure to China’s tech story with this one ETF, rather than worrying about the idiosyncratic issues with specific companies.

In terms of performance, HST has experienced volatility, reflecting the broader challenges faced by China’s tech sector in recent years. I can still recall buying HST at $1.30 after its IPO in 2021, back when China tech was the hot topic in the kopi-tiam. Arising from the regulatory crackdown, it dropped as low as $0.50 2 years ago – imagine this Uncle’s heartache! I’ve been doing periodic dollar cost averaging, but the downtrend was real.  

However, with signs of regulatory easing and renewed government support for technology and innovation, the sector has shown signs of recovery. Investors considering HST should be prepared for potential fluctuations but may find the ETF a valuable component for long-term growth exposure to China’s tech industry.

Now, let’s consider an alternative: the KraneShares CSI China Internet ETF, known by its ticker KWEB. This ETF tracks the CSI Overseas China Internet Index, which includes China-based companies whose primary businesses are focused on internet and internet-related technology. These companies are publicly traded on either the Hong Kong Stock Exchange, NASDAQ, or New York Stock Exchange. 

While KWEB provides access to a broad range of Chinese internet companies, it carries certain risks. Firstly, its concentration risks are higher as seen by the larger components of its top 10 holdings. Secondly, it has holdings that faced the same regulatory scrutiny and the threat of delisting from U.S. exchanges that I discussed earlier. Finally, I chose HST Because it’s listed in Singapore and in SGD, which just makes it more fuss-free to invest in. 

Before we move on to the China ETF with a 6% dividend yield that I’m personally invested in, please do this Uncle a favor and tap the ‘like’ button if you found this post useful so far. I really appreciate the support from you guys every single week! Alright, let’s jump back to the post. 

Tapping Into China’s Dividend Potential

For investors seeking income from China’s equity markets, the Lion-China Merchants CSI Dividend Index ETF, listed on the Singapore Exchange under the ticker INC, offers a compelling opportunity. Launched very recently on 28 March 2025, this ETF provides access to a diversified portfolio of 100 Shanghai-listed or Shenzhen-listed A-shares known for their high and stable dividend payouts. 

Many viewers have been asking me about what I thought about this ETF. As a dividend-focused investor, of course I was very interested and did my own research on it. 

Managed by Lion Global Investors in collaboration with China Merchants Fund Management, INC aims to replicate the performance of the CSI Dividend Index. This index focuses on companies with a consistent dividend payment history over the past three years, robust financial health, and a certain scale and liquidity. 

The ETF charges a management fee of 0.50% per annum, which I think is not too bad for a China-focused ETF. It is traded in both SGD and Chinese Yuan, offering flexibility, but I think for most of us, it should be the SGD version which is more convenient. But let’s be clear, the currency risk is not gone, everything is just being translated to SGD. 

One of the standout features of INC is its attractive yield, with expectations of around 6%, based on index-level data, though actual payout may vary. This is appealing to income-focused investors like me. However, one downside that I was quite disappointed to note is that the ETF distributes dividends on an annual basis, with the first distribution in December 2025. This may not align with the preferences of those seeking more frequent income streams.

On to better news. In terms of performance, the underlying CSI Dividend Index has demonstrated resilience amid market volatility. Between 2021 and 2024, the index posted positive gains in three out of four years, outperforming the broader CSI 300 Index during turbulent market conditions. 

When compared to alternatives like the Global X Hang Seng High Dividend Yield ETF, listed in Hong Kong, which focuses on Hong Kong-listed stocks, INC offers direct exposure to China’s A-share market. Although the Global X ETF has a higher dividend yield at the high end of 6%, I didn’t find the stock price performance as resilient as INC In addition, trading in SGD just makes it slightly more convenient. 

In summary, I think INC is very useful for investors aiming to capture the income component from China’s equity market, and its focus on high-dividend A-shares provides stability. 

The Dividend Uncle’s Take – My China Portfolio Plan (Still a Work In Progress)

So after looking at the three ETFs, how do they actually come together in a portfolio?

To me, this is one way to build a balanced China exposure without over concentrating in any one area. Here’s what I’m personally aiming for:

CNYA at around 50%. This will be the core of my China allocation. It’s broad-based, domestically focused, and likely to benefit most directly from stimulus or state-driven efforts to revive the real economy. I see this as the “engine room” of China’s recovery — less sexy than tech, but more grounded.

HST with about 30% of my allocation. This one is for growth. Yes, it’s more volatile — but I still want meaningful exposure to China’s internet and tech sector, especially now that the worst of the regulatory storm seems to have passed. The big names here are essential to China’s long-term innovation goals.

INC at about 20%. This is my income layer — not just for cash flow, but also for stability. These high-dividend-paying A-shares are less affected by market hype, and offer a nice ballast to the more volatile parts of the portfolio. Plus, a ~6% yield never hurts!

Now I’ll be honest — that’s my intended allocation, but I’m not fully there yet. The INC ETF is pretty new, and I only started nibbling recently. I prefer to build up my position slowly, especially since it only distributes dividends once a year. But assuming the ETF performs well and sticks close to the CSI Dividend Index over time, I’ll gradually increase my exposure.

All in, I feel this allocation gives me a good blend of stability, growth, and income. Of course, I’m not saying everyone should follow this exact split. Your own China exposure — if any — should match your comfort with volatility, and how much faith you still have in China’s long-term story. But for me, this feels like a balanced, diversified way to stay in the game, while managing risk.

Let me know in the comments — how are you approaching China exposure? Still sitting out entirely? Or cautiously nibbling back in like me?

Until next time — stay steady, stay informed, and happy investing.