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What Does a Biden Win Mean for China ETFs?

Sweta Jaiswal, FRM
·5 mins read

The world’s largest economy is on track for the most unusual presidential elections this year as the coronavirus pandemic continues to create a ruckus. Trade policy with China, one of the most controversial and bold policies during Trump’s regime, will definitely come under the scanner of voters and has become a talking point in election campaigns. The Sino-U.S. trade war saga that began in 2018 has seen the United States imposing tariffs on $550 billion of Chinese goods, per an article in China Briefing. Meanwhile, Beijing has imposed tariffs on $185 billion worth of U.S. goods.

The Trump administration has also highlighted other issues with China that include the enhanced protection of U.S. intellectual property, regulating the forced transfer of American technology to Chinese firms, making Beijing’s financial services market accessible to U.S. firms and creating pressure on China to refrain from currency manipulation.

However, on Jan 15, 2020, both countries entered the Phase one trade deal, with the United States suspending new tariffs on $160 billion of China-made consumer electronics and toys, as well as a reduction by half in the existing tariffs on $120 billion of other goods to 7.5%. In return, China vowed to purchase additional $200 billion of American goods over the next two years — $52.4 billion worth of energy, $32 billion in agriculture, $37.9 billion in services and $77.7 billion of manufactured products. The incremental purchases were add-ons to the 2017 U.S. export numbers.

Going on, trade officials have reaffirmed their commitment to the Phase one trade deal. Notably, the pledge was recently made between U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He on a phone call (read: ETF Winners as US-China Stay Committed to Phase 1 Trade Deal).

Trump administration is expected to move ahead with a follow-up agreement to the Phase one trade deal. The Trump campaign is also making promises to bring 1 million manufacturing jobs from China to the United States by providing tax credits to American companies, according to The Wall Street Journal article.

Will Biden’s Take Be More Diplomatic?

Experts believe Joe Biden’s advisers have a similar take on China as a threat to America’s supremacy in technology and as a global power. Nonetheless, the ground on which Biden’s approach is going to be different than Trump’s administrations will be ‘diplomacy’. Biden plans to work along with allies like Japan, Europe and others to put pressure on China in order to impose market-friendly trade practices and reform some World Trade Organisation rules, per a CNBC article.

Going by The Wall Street Journal article, Biden has expressed interest in working along with China on some global concerns like the coronavirus pandemic and climate change.

It is worth noting here that Biden is facing pressure from the labor unions demanding job protections and creations and progressives, which are camping for suitable actions on climate change, reduced drug prices and human rights, per a CNBC article. Meanwhile, farmers and U.S. corporations are lobbying for more lenient trade policies with China and tariffs cuts. Thus, experts believe the initial phase of the Biden administration is expected to keep up the tariffs imposed by Trump.

Meanwhile, Biden has also been campaigning highlighting that his tenure will mark greater emphasis and investments on important sectors like biomedicines, robotics and clean energy. The Biden government will also strive hard to maintain United States’ leadership in the technological sector in comparison to arch rival like China and curb on any malpractices being performed by the latter, according to The Wall Street Journal article.

China ETFs in Focus

Against this backdrop, investors can keep a tab on a few China ETFs like iShares MSCI China ETF MCHI, iShares China Large-Cap ETF FXI, Xtrackers Harvest CSI 300 China A-Shares ETF ASHR, SPDR S&P China ETF GXC, iShares MSCI China A ETF CNYA and Invesco Golden Dragon China ETF PGJ.

MCHI

This fund tracks the MSCI China Index. It comprises 607 holdings. The fund’s AUM is $5.91 billion and expense ratio is 0.59% (read: ETF Winners as US-China Stay Committed to Phase 1 Trade Deal).

FXI

This fund seeks long-term growth by tracking the investment returns, before fees and expenses, of the FTSE China 50 Index. It comprises 50 holdings. The fund’s AUM is $3.27 billion and expense ratio is 0.74% (read: China ETFs to Gain on Positive Trade Data Amid Coronavirus Crisis).

ASHR

This fund tracks the CSI 300 Index. It comprises 308 holdings. The fund’s AUM is $1.80 billion and expense ratio is 0.65% (read: China ETFs to Shine Bright on Solid Economic Data).

GXC

The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P China BMI Index. It comprises 743 holdings. The fund’s AUM is $1.39 billion and expense ratio is 0.59% (read: Alibaba's Strong Fiscal Q1 Earnings Put These ETFs in Focus).

CNYA

The fund tracks the MSCI China A Inclusion Index. It comprises 475 holdings. The fund’s AUM is $504.9 million and expense ratio is 0.60%.

PGJ

This fund follows the NASDAQ Golden Dragon China Index, which offers exposure to the U.S. exchange-listed companies headquartered or incorporated in the People’s Republic of China. It holds a basket of 70 stocks. The product has an AUM of $187.1 million and charges 70 basis points in annual fees.

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iShares MSCI China ETF (MCHI): ETF Research Reports
 
iShares China LargeCap ETF (FXI): ETF Research Reports
 
SPDR SP China ETF (GXC): ETF Research Reports
 
Xtrackers Harvest CSI 300 China AShares ETF (ASHR): ETF Research Reports
 
Invesco Golden Dragon China ETF (PGJ): ETF Research Reports
 
iShares MSCI China A ETF (CNYA): ETF Research Reports
 
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