China is a sleeping dragon. When she wakes, she will shake the world.
It’s been over 200 years since Napoleon allegedly said those, or similar, words. China has since become the world’s second largest economy and home to 1.4 billion people. By those metrics, it’s fair to say that China has at least been roused.
But despite recent threats of deflation, debt and a declining population, the country still presents exciting opportunities. So, is China fully awake yet?
This article isn’t personal advice. If you’re not sure an investment is right for you, ask for financial advice. Remember, all investments and any income from them can rise and fall in value, so you could get back less than you invest. Past performance also isn’t a guide to the future.
What’s the economic environment in China?
Since China emerged from its strict zero-Covid policy in late 2022, growth in some areas of the economy remains sluggish. An ongoing property crisis has impacted people’s personal wealth and led to low levels of consumer confidence.
Over the past year the Chinese government has announced a wave of measures to stimulate the economy, including debt relief for local governments and support for the property market. Interest rates have also been cut, with the 1-year rate dropping to 3% in May. Gross domestic product (GDP) rose 5.3% in the first half of 2025 and consumer confidence has increased, though it still has some way to go.
On the international stage, when Trump announced a range of tariffs on countries in April, China’s was 145% before being walked back. The final rate is still being negotiated. This suggests China holds more sway on the world stage than first thought, especially with trade.
Where are China leading right now?
China is a hub of innovation, leading in multiple industries, many at the forefront of modern life.
The country’s investment in research and development has increased to levels exceeding that of the EU, Japan, and South Korea. The number of patents filed by Chinese companies (an indicator of innovation) has grown rapidly and in recent years has accounted for more than half the global total.
One industry where China dominates is electric vehicles (EVs). In 2024, over 11 million EVs were sold in China – an increase of nearly 40% from 2023 and nearly two-thirds of all EVs sold globally.
Companies are expanding internationally, with BYD vehicles present in over 100 countries. In 2024 BYD generated more annual revenue than Tesla, making it the world’s biggest EV maker.
A key part of the dominance in the EV market is the advancements China has made in battery technology. Contemporary Amperex Technology Co. (CATL) have developed batteries with a single-charge range of 1000km, making EVs a more enticing proposition. Other companies are developing fast-charging batteries that could provide cars with a range of up to 2000km.
China also leads the way in solar power. China’s global market share in the manufacturing of solar panels is more than 80%. While plenty of supply is exported, lots is also used domestically. In the first half of 2025, the country installed more solar capacity than the rest of the world combined.
Why is the Chinese market attractive?
Valuations of Chinese companies have increased this year as the stock market has performed well. But they’re still lower than some other global markets, suggesting there’s potential for further growth.
While it’s stock market has been strong over the past year, share prices have been volatile.
The market reacted positively to news of government stimulus in September 2024, and saw another period of growth earlier this year following the emergence of the country’s AI application, DeepSeek. But the announcement of US tariffs caused a sharp drop in the market in April.
It’s not uncommon for China’s market to go through periods of volatility like this.
One year China stock market performance
Annual percentage growth
Aug 20 – Aug 21 | Aug 21 – Aug 22 | Aug 22 – Aug 23 | Aug 23 – Aug 24 | Aug 24 – Aug 25 | |
|---|---|---|---|---|---|
MSCI AC World | 25.68% | -0.04% | 5.17% | 19.55% | 13.16% |
MSCI China | -7.58% | -14.93% | -14.93% | -6.06% | 43.86% |
Elsewhere, countries like Japan and South Korea have embarked on programs of corporate governance reform. Chinese companies are also showing signs of improvement, with share buybacks occurring at an increasingly higher rate over the last couple of years.
3 fund ideas to invest in China
Investors seeking exposure to China have plenty of options.
The Wealth Shortlist features funds chosen by our analysts for their long-term performance potential.
Investing in funds or investment trusts isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a long-term diversified portfolio.
For more details on each fund and its risks, please see the links to their factsheets and key investor information below.
Investing in emerging markets is higher risk and investors should expect volatility. A fund invested in a single emerging market like China should only make up a small amount of a well-diversified investment portfolio.
FSSA Greater China Growth
Managed by Helen Chen and supported by Martin Lau, the FSSA Greater China Growth fund invests in companies across the Greater China region, including China, Taiwan and Hong Kong.
The managers look for companies with a competitive advantage that others struggle to replicate. Something like a well-known brand or the ability to raise prices for their products, without affecting demand from customers.
The fund can invest in smaller companies, which increases risk.
Annual percentage growth
Aug 20 – Aug 21 | Aug 21 – Aug 22 | Aug 22 – Aug 23 | Aug 23 – Aug 24 | Aug 24 – Aug 25 | |
|---|---|---|---|---|---|
FSSA Greater China Growth | 15.77% | -9.88% | -13.40% | -3.23% | 19.12% |
MSCI Golden Dragon | 5.73% | -11.11% | -11.29% | 7.32% | 32.71% |
IA China/Greater China | 1.90% | -12.57% | -18.56% | -11.96% | 39.70% |
Schroder Asian Alpha Plus
For investors looking for exposure to China but without the volatility of a single country fund, they could consider a broader Asian fund.
Schroder Asian Alpha Plus invests in countries across Asia. At the end of July, it had 23.81% invested in China, with a further 21.38% in Taiwan and 11.44% in Hong Kong. It also invests in other emerging markets like India and Vietnam. The amount invested in each country can change over time.
The fund’s managed by the experienced Richard Sennitt, who’s been investing in Asia for over 20 years. He’s supported by co-manager Abbas Barkhordar.
The duo search Asian markets for high-quality companies that have good cash flows, strong franchises, a quality management team, and a strong business model that's able to defend against competition.
The fund can invest in smaller companies and use derivatives, which increases risk.
Annual percentage growth
Aug 20 – Aug 21 | Aug 21 – Aug 22 | Aug 22 – Aug 23 | Aug 23 – Aug 24 | Aug 24 – Aug 25 | |
|---|---|---|---|---|---|
Schroder Asian Alpha Plus | 17.05% | -8.79% | -7.47% | 9.25% | 13.71% |
MSCI AC Asia ex Japan | 14.72% | -7.10% | -8.39% | 11.96% | 16.58% |
IA Asia Pacific ex Japan | 17.81% | -4.72% | -7.66% | 9.09% | 14.27% |
Fidelity China Special Situations
The Fidelity China Special Situations investment trust aims to grow capital over the long term by investing in a diverse range of Chinese companies.
The trust invests in companies of all sizes but tends to invest more in higher-risk smaller companies than the benchmark. The trust also invests in private companies which aren't currently listed on a stock exchange. These investments can be harder to buy or sell than listed companies, making them higher risk.
Dale Nicholls has managed the trust since 2014. He’s a veteran of Asian markets, having focused on the region for most of his near 30-year career.
Nicholls focuses on companies he thinks are undervalued and invests in them for the long term. The emphasis is on well-managed companies with strong growth potential. He dedicates a significant amount of time to meeting with companies and their competitors to gain a thorough understanding of industry dynamics.
The trust uses gearing and can use derivatives, both of which increase risk. The level of gearing typically used by the trust can lead to volatility in performance.
Annual percentage growth
Aug 20 – Aug 21 | Aug 21 – Aug 22 | Aug 22 – Aug 23 | Aug 23 – Aug 24 | Aug 24 – Aug 25 | |
|---|---|---|---|---|---|
Fidelity China Special Situations | 9.68% | -27.78% | -12.18% | -11.40% | 70.13% |
MSCI China | -7.58% | -14.93% | -14.93% | -6.06% | 43.86% |