Investing in Chinese stocks
Its economy is booming, but US tensions could force Chinese stocks off American exchanges.
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Interested in adding Chinese shares to your portfolio? Chinese growth stocks are plentiful and easily accessed from a domestic brokerage account in Australia. But the future of these stocks on Australian exchanges remains uncertain — especially for state-owned enterprises.
What are Chinese stocks?
Chinese stocks originate from companies that are headquartered in China. Like Australia, there are multiple Chinese stock exchanges — including the Hong Kong Stock Exchange, the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
How to buy Chinese stocks from Australia
There are a few ways for Australian investors to add Chinese stocks to their portfolios, including stocks and exchange-traded funds.
With an international brokerage account, you can purchase Chinese stocks directly from Chinese exchanges. Not many Australian brokers offer international trading, but there are a few that offer access to Asian markets, including Moomoo and Interactive Brokers.
For investors who aren’t ready for an international brokerage account, numerous Chinese companies also list shares on the ASX, offering investment opportunities for Australian investors with domestic brokerage accounts.
ETFs that track Chinese stocks are another way for Australian investors to diversify into Chinese investments. And Chinese ADRs — certificates that represent shares of foreign stock — can be bought and sold from domestic brokerage accounts.
Why invest in Chinese stocks?
China’s economy is on the rise, and its businesses are poised for growth. China is the world’s second-largest economy, second only to the United States. And it enjoys this position thanks to an average economic growth rate of over 6% for nearly 30 years, making it the fastest-growing major economy in the world.
China is also the world’s largest exporter, boasting an export value of approximately $2.5 trillion USD in 2019, according to Statista. In fact, the country’s year-over-year export growth hovered near 17% from 2002 to 2012.
The bottom line? China is a major driver of economic growth and backing Chinese companies presents a potentially lucrative investment opportunity for US investors.
Risks of investing in Chinese stocks
Chinese stocks present unique risks. Many Chinese companies are state-owned, and ongoing tensions between China and the US could result in Chinese stocks being delisted from US exchanges.
In 2017, there were 102 state-owned enterprises (SOEs) in the Fortune Global 500. Of those 102 SOEs, 75 of them were from China. In fact, there are over 150,000 state-owned enterprises in China, according to the China Journal of Accounting Research. Why does this matter? These SOEs have been accused of receiving unfair advantages, like low-cost loans, while yielding less competitive returns than their privately run counterparts.
China has plans to reform its SOEs, but it’s difficult to say what this reform will look like or what impact it could have on privately-held Chinese companies.
And speaking of reform, ongoing tensions between China and the United States have led to the Holding Foreign Companies Accountable Act: a bill introduced by the US Congress that requires companies listed on US exchanges to declare any connections with foreign governments. The bill also states that companies listed on US exchanges must submit to audits of the company’s financial performance.
For Chinese companies listed on US exchanges, the bill is problematic and could potentially result in numerous Chinese stocks delisting from US exchanges.
Chinese stocks listed on Australian exchanges
Over 50 Chinese stocks trade in ASX. You can buy, sell or hold these stocks with a domestic brokerage account the same way you would any Australian stock.
Over-the-counter (OTC) Chinese stocks
There are many well-established Chinese companies that don’t trade on Australian exchanges. If you hold an international brokerage account, you can purchase shares directly from Chinese markets.
And investors with domestic brokerage accounts can invest by buying American Depositary Receipts (ADRs) in OTC exchanges. Over 150 Chinese companies are listed in Australian OTC markets. ADRs can be purchased through any domestic brokerage account that offers access to OTC investments.
- China Railway Construction (CWYCY)
- China Railway Group (CRWOF)
- CITIC Ltd (CTPCF)
- Industrial and Commercial Bank of China (IDCBY)
- Ping An Insurance (PNGAY)
What ETFs track Chinese stocks?
Another option for Australian investors interested in adding Chinese stocks to their portfolio is by purchasing ETFs that invest in Chinese companies. While this is a less direct investment than purchasing shares, an ETF that tracks Chinese stocks offers broad exposure to a number of securities as opposed to just one.
- iShares China Large-Cap ETF
- VanEck Vectors China New Economy ETF
- VanEck Vectors FTSE China A50 ETF
- Global X MSCI China Consumer Discretionary ETF
Compare trading platforms
Many Chinese stocks can be purchased from a domestic brokerage account. Narrow down your options by comparing features, fees and research tools.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
There are numerous ways to invest in Chinese stocks from an Australian brokerage account. And for those who prefer to invest in Asian markets directly, brokers like Moomoo and Interactive Brokers offer international brokerage accounts.
Before you open an account, explore available trading platforms by fees and available markets to find the broker that is best positioned to serve your investment goals.
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