Orignial story corrected to reflect that the PowerShares Emerging Markets Infrastructure ETF is a a global equity fund focused on infrastructure development.
NEW YORK (
) -- Recently, China pledged to loan $20 billion to Venezuela as it seeks to strengthen its ties with oil-rich developing nations. The move underscores China's increasing wealth and global power.
China's GDP growth remains stunning, and it's expected to surpass Japan as the world's second largest economy sooner rather than later.
Following are four ways to invest in China and reap the benefits of its growth.
1. Chinese Equity Market ETFs: These exchange-traded funds allow investors to gain direct exposure to Chinese companies. Broad-based ETFs to consider include
PowerShares Golden Dragon Halter USX China
Claymore/AlphaShares China All-Cap ETF
SPDR S&P China ETF
These ETFs are similar in that China Mobile, China Life Insurance Company and CNOOC are among their top holdings.
For sector-specific exposure, one could consider the
Claymore China Technology ETF
, which gives exposure to 33 Chinese technology companies; the
Global X China Energy ETF
, which gives exposure to 23 Chinese energy-related companies or the
Global X China Industrial ETF
, which gives exposure to 31 Chinese industrial companies.
2. Broad-Based Emerging-Market Funds: These give investors exposure to multiple emerging markets. Some offer exposure to both China and other nations that are benefiting from China's growth. One such ETF is the
SPDR S&P Emerging Markets.
, which allocates 17% of its assets to China and 9.2% to Taiwan, a nation whose economy is closely tied to China's. Another notable mention is the
Vanguard Emerging Markets Stock ETF
, which allocates 17.8% of its assets to China, 12.4% to South Korea and 11.2% to Taiwan.
3. Emerging Market Infrastructure ETFs: These allow investors to reap all of the benefits of a growing China, a nation focusing on infrastrusture development. A good play here is the PowerShares Emerging Markets Infrastructure
, which gives ample exposure to Shanghai Electric Group Company Limited and Jiangxi Copper Company Limited.
4. Chinese Currency: The yuan continues to make headlines as Beijing continues to do nothing to raise the value of its currency. The yuan is thought to be drastically undervalued, giving China an advantage against other nations by effectively subsidizing its exports while imposing a de facto tax on imports. Currency plays on the yuan include the
WisdomTree Dreyfus Chinese Yuan
Market Vectors Chinese Renminbi/USD ETN
Although the International Monetary Fund states that China will be the global leader in GDP growth for 2010, political pressures and the formation of bubbles could potentially put a damper on China's explosive growth. To help mitigate against the risks involved with investing in China, it's important to use an exit strategy that identifies price points at which an upward trend could be coming to an end.
Such a strategy can be found at
-- Written by Kevin Grewal in Laguna Niguel, Calif.
Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.