The Benefits of China Funds During Globalization and in a New World Order

Haiwei Chen, Robert Killins and Chuyu Wang

Chinese Economy, 2025, vol. 58, issue 4, 345-358

Abstract: Examining data from their inception in the 1990s to 2022, we find that both China mutual funds and China exchange-traded funds (ETFs) outperformed their benchmarks, the S&P 500 index fund and SPY, before the global financial crisis starting in the summer of 2007 but underperformed afterward. We show that the real benefits of China funds in the post-crisis period since May 2009 lie in their hedge effect against U.S. stock market downturns. Current policies in both countries indicate the emergence of a new world order of selective segregation in some sensitive sectors but a continuous trading partnership because each country needs the other. For example, China needs computer chips from the United States, whereas the United States needs key chip-making minerals from China. Paradoxically, this new world order creates growth opportunities in both countries, which is conducive to investing in China funds and makes it necessary for China funds to invest directly in Chinese shares to better serve the U.S. investors.

Date: 2025
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DOI: 10.1080/10971475.2024.2416581

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